Orbit Group Limited
Value for Money
Statement
2015 - 2016
Co-operative and Community Benefit Society Number 28503R
Homes and Communities Agency Number L4123
Value for Money Statement 2015-16
1
Orbit Group Limited
Contents
03 Executive Summary
04 Introduction
06 VFM Strategy
10 Asset Management
13 VFM Gains
17 Operational Cost and Performance
24 Conclusions and Looking Forward
26 Appendix 1
27 Appendix 2
30 Appendix 3
31 Case Study 1 and 2
Value for Money Statement 2015-16
2
Orbit Group Limited
Executive Summary
High level Group performance
Orbit has achieved a saving of £5.1m in 2015-16 as part of an on-going efficiency
programme. All parts of the business have been involved in creating a more efficient
organisation which will put Orbit in an even stronger position to deal with the challenges
facing the Group and the sector. Progress is shown in the table below:
Acheived
2015-16
5.1
Identified
CUMULATIVE EFFICIENCY
45.0%
40.0%
2016-17
35.0%
3.1
5.1
30.0%
8.2
A detailed breakdown is included on page 13.
25.0%
The efficiencies are largely cash efficiencies and have all had a positive impact on
the Group’s profits.
20.0%
The efficiency process is inbuilt into the annual budgeting cycle, involving all budget
managers. The efficiencies are counted if they improve the Group’s profit, therefore
positively impacting on key ratios such as operating margin and social housing
lettings interest cover - increasingly important ratios to our funders as a sign of
financial strength and financial risk within the business. Managers have an objective
to achieve their budget plus any savings identified. Achievement of specific
efficiencies are monitored by Finance and get reported to the Executive Team on a
monthly basis.
15.0%
10.0%
5.0%
0.0%
Orbit retains ambitions to develop new properties to help meet the country’s
housing shortage. The reduction in grant and rental income to 2020 makes this
ambition more difficult and more reliant on debt funding. This makes retaining our
strong credit rating vitally important going forward. Orbit’s rating was retained at A1
in March 2016, a great result when considering the challenges facing the country
and the housing sector.
Social Housing
Lettings Margin
2014
2015
2016
Group Operating Margin
(before sale of existing
properties)
The full Value for Money (VFM) statement evidences how Orbit is delivering VFM to
its residents.
Looking at the trend of Orbit’s recent financial performance, it shows a continuing
improvement in social housing lettings margin, demonstrating the importance
Orbit places on its core activity becoming more efficient. Operating margin remains
strong at 24.4% (before taking into account housing stock sales). Orbit will not be
complacent and will continue to seek to improve this position.
Value for Money Statement 2015-16
2013
3
Orbit Group Limited
Introduction
Board Statement
As the Board, we have ultimate accountability for
driving, embedding and delivering VFM across Orbit.
Orbit has had a good year with a strong profit
of £38.3m, improving on budget and last year’s
performance. Efficiencies of £5.1m have been achieved
during the year, again beating the target set. This strong
financial performance has provided the capacity to
deliver the largest house building programme in the
organisation’s history and one of the largest in the
English social housing sector. Our credit rating score
has been re-confirmed at A1, which is an excellent
result taking in to account the challenges facing the
sector and the country.
During 2015-16, Orbit received a downgrade to its
governance rating from G1 to G2, due to weaknesses
in its internal control environment relating to fire
safety within the Orbit Living subsidiary. This issue was
identified internally by two of our sources of assurance
(Health & Safety Team and Internal Audit) and was
then reported through the governance structure and
subsequently self-reported to the Regulator (the Homes
& Communities Agency – HCA). Improvements were
immediately implemented to address the weakness in
the internal control environment and to complete all
high risk actions, meeting the deadline agreed with the
HCA of 31st December 2015.
Value for Money Statement 2015-16
Orbit Executive and staff have responded positively to
this challenge and a restatement to G1 was confirmed
in July 2016 – just 8 months after the downgrade.
At a time when there is so much uncertainty it is
understandable Orbit continues to review its strategies
and risk appetite. The Board are meeting in September
and will discuss the future direction of Orbit in light of
current and predicted economic conditions.
VFM
VFM is a part of Orbit culture embedded throughout
the organisation and in all we do. The Group has
delivered on its efficiency targets to date and will
continue to set pressing targets – and deliver on these
targets. ALL savings generated will be used to meet
our strategic objectives – delivering new properties,
improving the fuel efficiency of our homes, enhancing
services to customers and investing in our communities.
Our Approach
VFM is a fundamental part of our business plans and
Orbit Board will continue to challenge the business to
demonstrate strong delivery and transparency to our
key stakeholders in the year ahead, building on the
solid foundations already in place. None of us - Board,
directors, managers or staff can be complacent and we
will continue to strive for improvement.
4
Our customers are an integral part of our approach
to VFM at Orbit. A VFM training package has been
implemented and successfully rolled out to our
involved customers, giving them the skills and
knowledge to challenge our approach to VFM.
Customers have also been involved in significant
procurement exercises. Orbit has around 350 ‘involved
customers’ who are invaluable in challenging the Group
and providing valuable insight to improving services.
The Executive Team monitor business performance
every month and this is reported to Board regularly.
All Board reports include a specific section relating to
VFM helping to ensure it is a key consideration in every
aspect of the business. VFM performance is discussed
at Board level at least twice annually.
As a Board, we are responsible for Orbit’s assets and
resources and setting our VFM strategy. The Group
Board oversees VFM with delegated authorities to:
• Orbit Homes (build, development and sales);
• Orbit Living; a trading name for the activities of Heart
of England HA Ltd and Orbit South HA Ltd (Landlord
Services including housing management and repairs);
• Orbit Treasury Limited (tasked with achieving funding
needs to meet growth aspirations).
Orbit Group Limited
Orbit welcomes the HCA focus on VFM and as a
Board we appreciate our role in understanding our
costs. We strongly believe we comply with the HCA
VFM Standard. This statement should show VFM is not
an add-on to what Orbit do but is embedded within
everything we do.
2020 Ambition
Deliver 12,000 new homes
What does VFM mean to Orbit
Orbit’s Customer First framework makes the commitment
to “fully satisfy agreed customer requirements, at the lowest
internal cost”. Therefore VFM to Orbit means maximising
our resources to deliver services, community investment
and homes and so meet our 2020 objectives. However, the
long term financial stewardship is of upmost importance. In
light of increasing financial constraints, work towards Orbit’s
2020 objectives are continually reviewed.
Orbit’s Financial Plan remains strong to potential threats
and is focused on delivering the Group’s 2020 objectives,
the following table shows each target and the progress to
meeting it:
Progress to Completion
From the start of the 7 year business planning cycle in 2013, a total of 9,700 new homes are funded in the current financial plan.
Orbit has successfully completed negotiations with funders to increase the debt per unit covenant to £47.5k which increases
funding capacity.
Over 4,500 homes have been delivered to date since April 2013. Orbit was Inside Housing’s second largest HA developer in 2015-16.
Achieve a minimum of Band C in our homes
Orbit will deliver effective and efficient retrofit programmes, prioritising fabric first solutions to move all properties towards a
minimum of EPC Band C by 2030 to meet our agreed Warm Homes Standard. 66% of all rented stock is currently at Band C.
Provide a range of home rental and ownership options
Development plan of 9,700 homes including General Needs, Sheltered, Market Rent, Shared Ownership and Market Sale. Market
Rent sites being developed at Norwich and Stratford.
Provide a flexible housing journey
Financial capacity to provide a range of products meeting customer needs. Development programme provides a range of low
cost housing through to full market products.
Customer Satisfaction
Received STAR survey results in July 2016. Customer satisfaction reduced to 78.6% from 81.1% the previous year. Despite this,
Orbit is still committed to delivering 90% satisfaction targeted by 2020.
Provide financial advice to 20,000 people
Supported 9,482 Orbit customers.
Have 75% customer contact online
Currently at 10.1% online customer contact.
Provide 10,000 training and capacity building opportunities
Orbit has provided 6,400 training/digital support opportunities and helped 694 people into jobs.
Deliver £30m of investment into communities
Community Investment spend falls in to four key priorities:
• Helping customers manage their money;
• Supporting customers into employment and developing their skills;
• Supporting customers to get online and use the internet;
• Improving customers’ well-being.
£8m spend committed to date with £1.3m external funding received.
Our VFM Governance Framework can be found on
our website www.orbit.org.uk in the ABOUT section
Value for Money Statement 2015-16
together with a full copy of our VFM Self Assessment
and other VFM information.
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Orbit Group Limited
VFM Strategy
Orbit will flex its strategy to work with Government policies. The current Government
for example is targeting Home Ownership as a big part of its strategy in the coming
years. This may lead to greater assistance in building properties that fall into these
categories. Social housing properties also require more long-term debt funding
than Shared Ownership properties. So, although Orbit maintains an objective to
deliver 12,000 new homes to market, the tenure mix may move more toward home
ownership properties from when the target was perceived.
Delivering VFM has always been an important part of Orbit’s make-up but has
become increasingly important in recent times. Orbit has achieved a £5.1m
efficiency saving in 2015-16, and has identified a further £3.1m in the 2016-17
budget, which will be managed and achieved in the coming months. Orbit has an
ambitious house build programme which will in part be funded by internal profits
being re invested. Orbit’s work on VFM provides a focus to improve services and
release resources to meet development targets, improve our existing homes and
enable us to invest in our products and services and the communities where we
work.
Orbit achieved a profit of £38.3m for the 2015-16 financial year. This is another good
year of financial performance. Other key achievements this year include:
The housing sector is coming to terms with a turbulent year – dealing with the impact
of Government reforms to welfare budgets, rent reductions, Right to Buy and other
policy changes. Housing Associations have reacted in different ways to this agenda.
There has been a surge in merger activity with some very large-scale mergers
currently in progress. The aims of these being generally stated to create efficiencies
with a focus on creating additional capacity for building houses. The timing of the
merger announcements suggest this is at least influenced by Government reforms.
Some associations have reacted quite quickly to reduce their house building
programmes or even to stop building “social housing” entirely.
• £193m invested in new homes with 1,750 properties completed;
• The majority of new homes completed are at sub-market rent (1,069 props) or Low
Cost Home Ownership (477 props)
• £19.7m invested in our existing properties, retaining substantial compliance
(99.03%) with the Decent Homes Standard and improving 881 properties to an
EPC Band C;
• £2.2m spent on community investment, leveraging a further £1.4m of external
investment. We helped 315 people into jobs and delivered training to a further
1,307 people. For every £1 Orbit spends on community investment, £3.39
generated in social returns;
Orbit has not reacted in these ways. Orbit has retained its existing objectives set in 2013,
although there is an understanding they may be achieved in slightly different ways.
The Government decision to reduce rents by 1% a year for 4 years takes a big slice
of expected income from Orbit’s financial plan. It equates to a 16% reduction in
rental income by 2020 compared to the previous rent settlement – in cash terms
£30m a year. The rent reduction will certainly have a significant impact on post-2020
objectives. The Government’s previous rent formula could have funded an additional
5,000 units between 2020-2025. Orbits approach to the changing financial
environment is being discussed by the Boards in September 2016.
Value for Money Statement 2015-16
• Supported 8,000 people into home ownership through the Help to Buy team.
As the performance above shows, the £38.3m profit does not meet the entire
Group’s spend in 2015-16. The remainder is funded through Grant income, Property
Sales and Debt. The following graph illustrates Orbit’s total spend and how it was
funded.
6
Orbit Group Limited
Orbit using its Profits
250
200
150
100
50
0
Funded By
Spend
Debt
Capital Grant
House Sales
Cash Profit
IT Investment
Capital repairs
Development
Value for Money Statement 2015-16
7
Orbit Group Limited
Value for Money Statement 2015-16
8
Orbit Group Limited
VFM Embedded in Orbit
The Executive Team identified key ratios for maintaining the Group’s current credit rating. These are operating margin – a
measure of how efficient the core business is, and social housing interest cover – a measure of how risky the Group’s profits are in
meeting interest costs. These ratios give a lot of weighting by Moodys rating agency and therefore important to Orbit’s business.
Moodys operating margin benchmark for organisations aspiring to be A rated is 25%, a figure met throughout Orbit’s financial
plan after 2017.
Social housing interest cover measures how many times social letting income covers the Group interest charge.
Orbit aims to work at 1.5x, a measure which is met through the financial plan.
Project Management ensuring VFM
All new projects are directed through the Programme Management Office (PMO)
and are approved at Executive Team level. The Executive Team Programme Board,
which meets monthly, is responsible for:
• Approval of all major change across the Group, oversight of all significant change
across the Group;
• Prioritisation, scheduling and resourcing of change across the Group;
• Monitoring of key change activities to ensure they are on track and delivering the
agreed benefits and risks are being managed;
• Ensuring all projects provide VFM and benefits are realised.
This ensures approved projects will enable Orbit to meet our business and
transformational objectives and are aligned to the 2020 Vision and targets. This is
part of the commercial culture being cultivated in Orbit ensuring the business is
delivering what is expected, not wasting valuable resources and embedding benefits
realisation across the Group.
Value for Money Statement 2015-16
9
Orbit Group Limited
Asset Management
The Group currently owns/manages 39,000 properties with a balance sheet
valuation (including grant receipts) of £1.4bn. The following table shows a high
level picture of the Return on Investment for Orbit’s housing stock. The blue line
shows the total for the Group and is broadly in line with the Properties for Letting
as this is by far the largest stock group. The green line is taken as a benchmark
position and is from the HCA global accounts which Orbit is outperforming.
(Global accounts for 2016 are estimated).
Return on Investment
7.0%
6.0%
5.0%
Properties
for Letting
4.0%
Low Cost
Home Ownership
3.0%
Weighted Average
- Total Social Assets
2.0%
HCA Global Accounts
- Benchmark
1.0%
0.0%
2013
Value for Money Statement 2015-16
2014
2015
2016
10
Orbit Group Limited
The graph below shows the result of assessing the 31,000 rented properties owned
by Orbit, split in to 1,713 estates. Of the 1,713 estates, a total of 232 perform under
£25,000 per property, meaning they are not contributing enough financially. These
properties are in fact subsidised by the remaining 1,481 estates that are performing
over the £25,000. This performance is affected by a number of factors. It is worth
noting all of Orbit’s social rented units were hit by the new rent setting rules provided
by the Government and the impact of this single change pushed around 2,200
properties under the £25,000 target.
Orbit recognises we need to make the best use of existing assets. As well as making
sure properties are fit for purpose and meet the needs of Orbit’s customers, each
individual property’s financial performance is regularly reviewed. Active management of
the property portfolio is important to ensure financial and management resources are
focused on properties that meet current and future demand.
These key factors are reviewed in each of Orbit’s existing properties:
• 1 NPV (Net Present Value) – shows the current NPV and if we will be able to improve
NPV significantly in future;
• EPC (Energy Performance Certificate) - shows current rating and if measures to
bring rating up will be financially viable;
NVP of Orbit Estates
• Maintenance and Repair liability – comparison of value against the portfolio
average to see if it differs greatly;
450
400
• Strategic Fit - evaluates how well the scheme fits with Orbits 2020 vision and
geographical spread;
350
• Lettability/Housing need – ease of identifying customers in the area for the
property concerned.
300
Orbit sets a minimum NPV of £25,000 per unit, below which a property is considered
to be poor performing financially.
250
200
A Strategic Asset Management Team has been established within Orbit looking at
the performance of existing properties and creating option appraisals to assess how
Orbit gets the best from its stock. This team has increased in size this year as Orbit
recognises the potential for improving this area of operations. The team is focused
on looking at poor performing stock with options ranging from redevelopment to
outsourcing of housing management to disposal of properties.
150
100
50
0
NPV – Net Present Value. This means valuing all of the expecting cash income and expenditure for 30 years in today’s prices.
¹
Value for Money Statement 2015-16
11
0 - 10k 10 - 15k15 - 20k20 - 25k25 - 30k30 - 35k35 - 40k40 - 45k45 - 50k 50k+
Orbit Group Limited
Effective Investment
Orbit challenges and validates property management and maintenance
programmes annually, alongside longer-term plans, to ensure VFM is embedded.
Orbit’s development and sustainability programmes will ensure standards of comfort
and affordability are delivered for all customers. Key elements in our approach are:
• Orbit invests prudently and proactively in assets through planned programmes, to
meet a ‘just in time’ approach, maximising preventative maintenance and reducing
future responsive requirements for good stock condition. Long term, Orbit aims
for a ratio of 40:60, responsive repair expenditure to planned maintenance. The
objective is to have a property repairs service that is more preventative, reducing
the need for responsive or urgent works. Current performance is around 60:40;
• A 30 year stock investment plan showing financing requirements is maintained to
support this strategy. Orbit’s 30 year financial plan reflects the long term strategic
aims of the business and is cascaded through the annual budget setting process;
• Where appropriate, Orbit will deliver effective and efficient retrofit programmes,
prioritising fabric first solutions to move all properties towards a minimum of EPC
Band C by 2030 to meet our agreed Warm Homes Standard;
• Customers are central to our approach to provide a robust and consistent
implementation of this strategy and Orbit standards, driving efficiencies in the bulk
purchasing of material and the quality control of works contracts;
• Key Performance Indicators (KPI’s) are in line with this strategy and greater use is
being made of our real time KPI tool;
• Orbit uses benchmarking information gleaned from its membership of Housemark,
to compare with our peers.
Value for Money Statement 2015-16
12
Orbit Group Limited
VFM Gains
Orbit’s drive for greater efficiency is on course to deliver £8.2m within 2 years, which
will directly improve Group profits. Progress is shown in the table below:
2015-16
Acheived
2016-17
£000
Bad Debt management
917
3.1
Orbit Homes - development build cost efficiencies
854
8.2
Service Matters (increased Profit)
708
Reduction in Insurance Premiums (procurement led)
576
Other Procurement Savings
316
Health Insurance Savings
235
Office facilities
205
Corporate Communication/Conference savings
138
Aids and Adaptations
117
Property MOT efficiencies
102
Improving rent statements process
100
Reduction in letting time
100
Other Recorded efficiencies
754
5.1
Identified
CUMUMATIVE EFFICIENCY
The £5.1m achieved in 2015-16 is summarised below:
5.1
The efficiencies are largely cash efficiencies and have all had a positive impact on
the Group’s surpluses.
5,122
Value for Money Statement 2015-16
13
Orbit Group Limited
Social and Environmental Gains
The programme in 2016-17 will deliver:
This section provides a snapshot of the various ways Orbit has created social value
over the course of 2015-16.
• 180 employment outcomes;
• 1,400 people given employment/other training;
• 6,750 people given financial and energy advice;
Community Investment
• Leveraging £400k in external investment.
As a responsible business we think beyond ‘bricks and mortar’ and look at what
really makes a community – the people. We use our expertise and funding to
support local communities to thrive and prosper - economically, socially and
environmentally. To maximise impact we are working with a range of local partners
and organisations.
Sustainability
A key focus of our sustainability strategy is to support our customers to reduce their
energy usage, helping them to save money and tackle fuel poverty.
Orbit has sourced funding under the Energy Efficiency Renovation Programme
(EERP) to increase EPC banding to at least Band C retrofitting 860 properties with
external wall/cavity/loft insulation. It has enabled customers to save money, reduce
carbon emissions and to take advantage of the benefits a warm home has on an
individual’s wellbeing.
Our community investment offer focuses on four key areas, namely employment &
skills; financial inclusion; digital inclusion; and wellbeing.
In 2015-16 our community investment programme helped:
• 1,307 customers undertake employment-related training skills;
The Energy Clinic is a new way we provide customers with energy advice at the right
level, by the right person, at the right time. It consists of three integrated parts, namely:
• 315 customers into jobs;
• 2,242 customers with financial advice from in-house teams and projects;
• Energy Advice Triage – assessment of a customer’s need;
• 5,823 with wellbeing programmes to help manage issues of mental health,
hoarding and ASB;
•E
nergy Advice Treatment – provision of appropriate advice based upon
identified need;
• 861 customers to build and improve their online skills.
• Energy Advice Follow Up – collecting feedback to assess the effectiveness of the
advice provided.
To assess the social value created by our community investment activities, we use the
well-recognised HACT (Housing Association Charitable Trust) valuation tool. This
has shown our investment in 2015-16 has generated £3,356,010 in net social value
at a ratio of 1:3.39, meaning that every £1 invested resulted in £3.39 worth of social
value.
Value for Money Statement 2015-16
In 2015-16, the Energy Clinic supported a total of 1,928 customers.
In addition we have been campaigning on the issue of fuel poverty, publishing our
report Warm Homes, Better Lives, which sets out how government together with
housing, health and third sector partners can take a comprehensive approach to
tackling fuel poverty.
14
Orbit Group Limited
Staff Volunteering
We encourage and support staff who either wish to become
or who are already involved in volunteering for the benefit of
Orbit residents and/or the wider community. All staff are eligible
to take up 1 day paid volunteering leave per year.
Orbit gives its staff the opportunity to volunteer in a range of projects
to assist the community. In 2015-16, 95 staff volunteers invested 631
hours to support 26 different projects.
Value for Money Statement 2015-16
15
Orbit Group Limited
Value for Money Statement 2015-16
16
Orbit Group Limited
Operational Cost and Performance
Financial Performance
The social lettings margin has improved to 40% which is a real sign of the efficiency
of the Group’s core business – important given the rent constraints that apply to the
next 4 years. Operating margins remain strong.
The following graphs show the progress being made by the Group
in creating a more efficient organisation.
High level Group performance
45.0%
40.0%
Social Housing
Lettings Margin
35.0%
30.0%
Group Operating Margin
(before sale of existing
properties)
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2013
Value for Money Statement 2015-16
2014
2015
2016
17
Orbit Group Limited
The following graphs show a positive trend which has a direct impact on the social
housing margin reported above.
Looking at these trends in light of customer satisfaction shows that despite
successfully reducing the costs of services, satisfaction levels are broadly maintained.
Revenue Maintenance Costs
35.0%
30.0%
25.0%
20.0%
15.0%
Satisfaction Ratios
2015-16
2014-15
2013-14
Satisfaction with Service Provided
78.6%
81.1%
76.6%
Satisfaction with Repairs and Mainenance
79.9%
80.3%
78.5%
Satisfaction with new homes (rented)
85.0%
86.0%
89.5%
Satisfaction that rent provides VFM
84.3%
80.4%
76.4%
10.0%
5.0%
0.0%
2013
2014
2015
% of Turnover
% of Rent
2014
2015
2016
Management Costs
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2013
% of Rent
Value for Money Statement 2015-16
2016
% of Turnover
18
Orbit Group Limited
Procurement – Delivering VFM
As well as delivering its 2016-17 programme, the procurement team plans to
assist in the improvement of contract management through the provision of a new
framework and training for all Orbit managers. The team is also looking to improve
engagement and outcomes with its key suppliers by adopting “supplier relationship
management”. This approach requires a more integrated methodology based on the
realisation of mutual benefits. It is also looking to roll-out a new e-tendering solution
which will increase efficiency by moving away from paper tenders.
Orbit has an established procurement team working alongside the business
ensuring compliance to relevant standards and maintaining VFM objectives when
entering into new contracts. The team was set a target of £9m savings by 2020,
£4.5m of which has been identified by March 2016 – ahead of the cumulative target.
In 2015-16 the procurement team achieved an overall customer satisfaction rating of
91% - an indication their work is increasingly seen as integral to the business.
Customers continue to play an integral part of the procurement process for
example:
In 2015-16 a five year programme of reviews was identified; utilising the principles
of category management. This approach, based on risk and expenditure will
ensure Orbit is identifying appropriate areas for a procurement review. Whilst in its
early days, we will be able to plan procurement activity more effectively. This gives
more time to consider requirements, improve specifications and incorporate other
objectives such as Social Value and Sustainability.
(1) Being involved in the new windows and doors contract within Orbit Heart of
England. Their involvement helped to achieve over £400k savings over the life of
the contract.
(2) During the year a dedicated VFM training package was developed and
implemented as part of the overall training and support which is provided to our
involved customers.
In addition the procurement team is providing services to a range of Registered
Providers through its Service Matters branding. The team helped their clients save
over £1m and achieved overall customer satisfaction of 100%. This work also allows
the team to consider best practice procurement; with good ideas being identified
and considered for adoption within Orbit.
(3) A strong customer-led challenge of Orbit’s customer involvement activities led
to a reduction in costs of 40% (circa £25k) in direct costs, while increasing the
number of residents involved in co-regulatory activities. This involved stopping
activities thought to be less value added while increasing the use of technology
to undertake customer consultations – reducing the need for costly face to face
meetings.
(4) A range of e-learning packages is to be introduced so customers who wish to be
involved remotely from their own homes have greater access to training which
will include a specific module for VFM.
Value for Money Statement 2015-16
19
Orbit Group Limited
Thinking and acting commercially – Selling professional
services for “profit for a purpose”
Benchmarking
Orbit undertakes a number of benchmarking exercises at a Group level and at a
departmental level to assess performance against peers. The largest exercise is run
with Housemark, which is an organisation-wide application, specific to the housing
sector. The following table shows high level results against other Housemark users.
The 2015-16 figures are being submitted but were not available for this report.
For over a decade Service Matters has been helping organisations in the housing,
public and private sectors to deliver efficiencies, VFM and compliance through the
provision of professional services.
Over a hundred organisations have realised the benefits of partnering with Orbit
Group to deliver back office services under our unique Service Matters brand. Since
2004, we have been innovating and creating solutions for all types of new and
emerging business challenges that have delivered exceptional results.
Housemark VFM Scorecard (Selected Ratios)
Cost per Property Housing Management
Cost per Property Major Works
This approach not only delivers efficiency and VFM for our customers but also
provides a financial return within Orbit.
Cost per Property Reponsive Repairs
Orbit Homes also works with smaller Registered Providers providing turnkey
developments and project management services.
2013-14
Median
447
453
444
1,229
1,165
1,520
845
925
806
A report is prepared for Executive Team which analyses these figures and trends in
much more detail. Benchmarking is an important exercise and one from which we
can learn and drive VFM. It is also important to recognise and understand some of
the underlying factors such as quality of stock, disbursement of properties etc. rather
than purely focusing on the final result.
Improving efficiency of commercial contracts
In 2014 Orbit secured, through a retender, the Help to Buy contract for East and
West Midlands. As it was a competitive bid, planned efficiency improvements were
identified through the bidding process that were needed to be delivered to meet
the customer and stakeholder requirements as well as the internal financial return
required from the contract.
More detailed analysis is shown as an appendix with a benchmark against 40 similar
organisations. This is based on 2014-15 data due to the timing of the submission.
The HCA has provided housing associations with further guidance around how they
will review VFM going forward. The unit cost analysis, although high level, provides
a good basis to understanding Orbit’s costs compared to peers. Orbit has used the
HCA methodology to calculate the unit costs of 9 peer organisations with a view of
assessing performance (this is based on 2014-15 accounts due to availability of data
but will be updated when 2015-16 accounts are published).
Directly after the successful award of the contract, work was undertaken to review
the end to end process using lean techniques. In 2015-16 the team realised an
annual 34% efficiency saving.
Value for Money Statement 2015-16
2014-15
20
Orbit Group Limited
Headline Social Housing CPU £k
Orbit Group Cost per Unit 2012 - 2016
£000
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
Sovereign Group
Orbit
Group
2012
Symphony
Metropolitan Group
Orbit
Group
2013
Midland Heart Group
Orbit
Group
2014
Orbit Group
Your Housing
Orbit
Group
2015
Hyde Group
A2 Group
Orbit
Group
2016
Riverside
Home
Headline Social Housing cost CPU (£k)
Orbit’s overall annual cost per unit of £3,460 places us 5th out of the peer group
of 10 similar housing associations. Trend data has also been plotted against the
HCA methodology showing performance between 2012 and the approved 2016
financial statements.
Management
Service charge
Maintenance
Major Repairs
Other Social Housing
Value for Money Statement 2015-16
21
Orbit Group Limited
Strengths:
• Management costs (core Housing Management costs) are the best among the peer group.
Between 2012 and 2016 these costs have steadily reduced from £550 per property per year to
£510. In this time Orbit has delivered an extra 2,094 homes into the business while absorbing this
growth as much as possible within existing staffing resources;
• Service charge costs compare well with most peers. These costs should be covered by service
charge income, as services are specified and delivered in agreement with customers. Whilst we
have identified service charges recovery as an area for improvement with a project underway,
income has grown from £12.9m in 2012 to £14.8m in 2016;
Areas for improvement:
• Maintenance costs is the stand out area of high cost. Our current ratio of responsive to
planned maintenance investment is around 60:40, with plans to achieve a 40:60 ratio. Spend
on responsive costs are high compared to peers, contrasting from planned works costs
which are lower. These cost profiles are a reflection of the contracts Orbit has in place and
a rebalancing should lead to cost savings in time. This work backed up what Orbit had
already started to work on in its asset Management Review.
Orbit has carried out more detailed Back Office Benchmarking, which focuses on
functions such as finance, HR and IT. The results show Orbit Group is performing
to a median position compared against similar organisations undertaking this
exercise, which was based on 2016-17 budget data.
Value for Money Statement 2015-16
22
Orbit Group Limited
Back Office Cost/Turnover
0
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Radian
ForViva
GenesisHousing
Home Group
14.0%
16.0%
Orbit engages closely with a group
of Midland based RSL’s which runs a
number of benchmarking activities
including Financial Services and
Maintenance. The Finance Directors
meet regularly and discuss the
benchmarking results and the reasons
behind them. The open dialogue
provides another forum for ideas in how
to further drive efficiencies.
Orbit Group
Median
Your Housing Group
Incommunities
Upper Quartile
Walsall
Midland Heart
Circle Anglia
Value for Money Statement 2015-16
23
Orbit Group Limited
Conclusions and Looking Forward
Orbit’s focus for 2016-17 is:
Orbit has achieved £5.1m in savings in 2015-16 and is confident of achieving the
efficiency targets for the next year. The 2016-17 budget includes £3.1m of identified
savings. Future efficiencies will be found through end to end reviews and further
digitising of our processes and customer offer. The savings sought will not have an
adverse impact on customer service.
1. Stronger contract management;
2. Modelling of responsive maintenance and planned maintenance costs to achieve
an optimum planned:responsive works mix;
Projecting this forward using the financial plan, our cost per unit performance will
improve from just below £3,500 in 2015-16 to £3,300 in 2020. This is partially a result
of developing additional properties without adding to the cost base where possible
but also due to the efficiency targets that are built into our future plans.
3. A review of service charges looking at the long-term potential to increase profits
by up to £1m a year;
4. Driving more value from investment, disposals and property usage/
redevelopment through the Strategic Asset Management Director and team in
place;
Cost per unit projection
5. Improving investments and disposal decisions to revise Asset Management
Strategy;
4,000
6. Improving core operations to reduce waste and repeat work.
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2016
Value for Money Statement 2015-16
2017
2018
2019
2020
24
Orbit Group Limited
Orbit is working in an ever-more commercial environment, with a £1bn+ loan
book and development ambitions requiring further funding over the next 5 years.
Creating a healthy profit is vital. External assessment of the Group’s finances – by the
Government, our funders and our credit rating agency has increased in importance.
An adverse credit rating could impact on the cost and perhaps the availability of
future funding, jeopardising the Group’s long term objectives.
Our objectives can be summarised into three areas:
• Funding future development activities – to provide 12,000 new properties to
the market by 2020, maintain a large development programme after 2020,
contributing to meeting the nation’s housing crisis;
• Continuing to invest in Orbit properties – ensuring all homes are at Decent Homes
Standard and meet a Band C eco level;
• Continuing to invest in our communities – to help give people the things they need
to succeed.
Orbit is evolving to its environment and senior management are working hard to
drive out process inefficiencies. Orbit is employing compassionate commercialism
in its management of existing properties – considering what is best for customers
and communities as well as for the bottom line. Growth opportunities are being
maximised to sell our services externally and profit for a purpose is as
important as ever in meeting the needs of Orbit communities.
Value for Money Statement 2015-16
25
Orbit Group Limited
Appendix 1
This shows Orbit’s self-assessment on VFM, looking at the regulators key areas of
assurance. Orbit has followed this methodology from the start of the Self-Assessment
regime. The ratings in brackets are taken from our self-assessment 2014-15.
Performance management and scrutiny functions are effective at driving and
delivering improved performance with outcomes and outputs clearly measured –
AMBER (2015: GREEN)
Understanding the cost of delivering specific services and how these relate to
benchmarks – AMBER (2015: AMBER)
Executive Team and Board have regular sight of Group wide KPIs – controlled
through a central reporting system. Senior Management Teams also see their KPIs
on a monthly basis. However due to the fire safety issue self-reported to the HCA it
was identified by management that further improvements to monitoring operational
performance was required; which has now been rectified – culminating in the
Group’s reinstated G1 rating.
Orbit conduct a number of benchmarking exercises and take part in a number of
benchmarking forums to increase the understanding of costs against peer groups.
There is still more to do on this and a project is underway to understand how Key
Performance Indicators across the business affect costs and ultimately profits.
A robust approach to decision making on the use of resources, including an
understanding of opportunity costs and clear evidence of delivery – GREEN (2015:
GREEN)
The efficiency gains which have been and will be made and how these will be
realised – GREEN (2015: GREEN)
Orbit has set clear targets for efficiencies, plans how to deliver targets and has a
track record of delivering. The budget setting process captures efficiencies and
then managers have an objective to achieve them. Orbit has a quarterly budget
reforecasting exercise which reviews spend, cutting out any underspends from
future budgets and reallocating resources where they are required.
All new projects are approved at Executive Team level ensuring each approved
project is aligned to our business plan and 2020 Vision.
A rigorous approach to assessing options for VFM improvements including
potential benefits from alternative delivery models – GREEN (2015: GREEN)
Orbit use a Strategic Asset Management tool to calculate the performance of Orbit
owned properties. This helps to identify poor performing properties which are
then subjected to option appraisal work. This data is updated on a quarterly basis
including all assumptions that underpin it.
An understanding of the return on assets and a strategy for maximising future
returns – GREEN (2015: GREEN)
Business cases provided for all projects which now include benefits realisation
and the alternatives that have been considered. All papers presented to Boards or
Executive Teams consider VFM.
Key:
Green – full assurance
Amber – partial assurance i.e. we can demonstrate consistency and/or it is not fully
embedded
Red – cannot provide assurance
Value for Money Statement 2015-16
26
Orbit Group Limited
Appendix 2
Housemark detailed benchmarking
This uses 2015 data provided to Housemark to benchmark against peer Registered Providers.
Abbreviations Key
KPI
Key Performance Indicator
CPP
Cost Per Property
GN
General Needs
HFOP
Housing For Older People
Quartile key
= Upper Quartile
= Middle Upper
= Median
= Middle Lower
= Lower Quartile
= N/A
Value for Money Statement 2015-16
27
Orbit Group Limited
Value for Money Statement 2015-16
28
Orbit Group Limited
Value for Money Statement 2015-16
29
Orbit Group Limited
Appendix 3
Housemark benchmarking organisations – English HA’s over 10,000 properties
A2Dominion
Forbs Living
Peabody
Adactus Housing Association
Gentoo Sunderland
Pennine Housing 2000
Amicus Horizon
Great Places Housing Group
Plymouth Community Homes
Aster Group
Green Square Group
Radian
Bolton At Home
Guinness Partnership (The)
The Regenda Group
BPHA
Hanover Housing Association
Riverside Group
Catalyst Housing
Helena Partnership
Rochdale Boroughwide Housing
Circle
Home Group The Association
Salix homes
City West Housing Trust
Hyde Group
Southern Housing Group
Coast and Country Housing
Incommunities
Spectrum Housing Group
Contour Home
ISOS Housing
Stonewater
Curo Group
Liverpool Mutual Homes
Thirteen Group
DCH Group
Longhurst Group
Town and Country Housing Group
EMH homes
Magnet Living
Wakefield and District Housing
Family Mosaic
Network Housing Group
Walsall Housing Group
First Ark
New Charter Homes
Wrekin Housing Trust
First Choice Homes Oldham
Notting Hill Housing Group
Wythenshawe Community Housing Group
First Wessex
One Vision Housing
Yorkshire Housing
Flagship Housing Group
Paradigm Housing Group
Your Housing Group
Value for Money Statement 2015-16
30
Orbit Group Limited
Case Study 1
Case Study 2
Review of Shared Ownership Sales and Marketing Process
Business Challenge “Waste and Efficiency”
Orbit’s plans are to double the amount of shared ownership new build in 2016-17
from the volume delivered in 15-16. To facilitate this a lean review was conducted
with a range of frontline staff and stakeholders through workshops to map the
current process, to identify areas of potential “waste” and to suggest a future state
process that was more effective and efficient.
During January to March 2016, all teams within Orbit Group took part in a business
challenge. Facilitated by managers themselves these sessions proved very
successful in engaging frontline staff in a very practical way of thinking about what
is within their control to improve efficiency within their own teams. Over 600 staff
participated in the challenge with 400 improvement ideas being implemented
across teams.
From this review a number of quick wins were identified (totalling around £175k) plus
some significant opportunities to improve the long term efficiency of the process
through the introduction of new ICT system and improved enquiry and call handling.
The benefits from these projects would be much more substantial than the quick wins
and provide the foundation for Orbit to deliver its 2020 objectives.
“I was pleasantly surprised by the level of engagement I
received towards to customer challenge. The team were
compelled to challenge their behaviours by thinking about
why we do what we do, is there a better more effective/
efficient way and what impact we have on others”
To ensure the quick wins and longer term projects were delivered, the sales and
marketing team seconded one of their sales consultants into the business improvement
team to provide a focused resource to ensure the benefits will be realised.
Laura Parsons, Procurement Team.
“Using lean techniques to review our sales and marketing
process for shared ownership has been enlightening.
On the face of it we were hitting or exceeding all our
targets so initially we couldn’t see the business case for
the review. However, once the team looked at the process,
we discovered a lot of potential for improvement at the
frontline that we hadn’t realised existed. Even with the
quick wins in place, the process is more efficient and a
better experience for staff, stakeholders and customers
and we have been able to accommodate increased
volumes with a better margin”
Chris Jones and Maggie McCann, Development Directors, Orbit Homes.
Value for Money Statement 2015-16
31
Orbit Group Limited
www.orbit.org.uk
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Orbit Group Ltd. Registered Office:
Garden Court, Harry Weston Road,
Binley Business Park,
Coventry CV3 2SU