North Yorkshire Council
Shareholder Committee
13 May 2025
Brierley Group 2024/25 Quarter 3
Financial Performance report.
Report of the Assistant Director
– Commercial, Property and Procurement
1.0
PURPOSE OF THE REPORT
1.1 To provide Shareholder Committee
with an update on the Brierley Group’s performance for the
2024/25 financial year, based on financial information as at Q3
(December 24).
1.2 To obtain shareholder approval
for the payment of a £1 million dividend to North Yorkshire
Council by Align Property Partners Limited, reflecting the
continued strong trading performance of the company during the
year.
2.0
SUMMARY – BRIERLEY GROUP HEADLINES
2.1 As at Q3 the forecast financial
performance across the Brierley Group reflects a positive position
with an overall pre-tax profit projection for the year of
£2.629m. The Group also
continues to deliver significant additional value for the Council,
with a total projected Shareholder Value of
£12.3m.
2.2 The forecast outturn position for
the Group overall is slightly below the original budget projection,
although there are some significant variations across the
performance of individual entities. Further variations are also
expected in the final quarter of the year, as noted below.
2.3
Align Property Partners (APP) and
Align Property Services (APS) performance at Q3 continues to
indicate that the strong trading position seen in recent years will
be sustained, with a pre-tax profit of £1.581m projected
across the companies for the year. In recognition of this
performance APP’s board of directors have resolved to pay a
dividend of £1m to the Council as shareholder.
2.4
Yorwaste, NYES, NYnet and NY
Highways also continue to deliver strong returns and Shareholder
Value with NYC’s share of outturn profits projected at
£1.282m, £808k, £398k and £75k
respectively, and NY Highways also forecasting a significant
revenue return to NYC at year end generated through efficiencies
and cost savings. The projected NYES surplus of circa £800k
at Q3 represents a particular achievement given the trading loss
that was reported in 2022/23, and the draft outturn
projection shows that this position is likely to improve further in
the final quarter with updated profit estimates being well in
excess of £1m.
2.5
Notably, the Brierley Homes forecast at Q3 shows a projected loss
of £2.073m for the year, which represents a deterioration of
circa £2m against the broadly breakeven position reported at
Q2. The position is due to the refinement and reprofiling of the
company’s sales and construction programme during the year
which has resulted in a number of sales, initially forecast to take
place in 24/25, now reprofiled to the 25/26 financial year. The
approach taken by Brierley Homes aims to ensure that, going
forward, returns are generated whilst maintaining loan financing
requirements within the agreed NYC loan facility. It is also of note that Brierley Homes are now
working with the Council to help contribute to the delivery of
affordable homes and the development of sites where financial
viability is difficult.
2.6
The draft outturn position for Brierley Homes is still being worked
through however current projections anticipate that a further loss
in the region of £1m will accrue in the final quarter of the
year due to further delays in sales income and associated financing
costs; taking the total in-year projected loss for the company to
around £3m. Detailed work is currently being undertaken to
review the operating model of the company including the historic
trading position, future development pipeline and business plan
projections, profits, cashflow, and financial resilience. Any key
issues arising from that review will be reported back to the
Shareholder Committee in due course.
2.7
The Q3 position for Brimhams Active
shows a projected outturn ‘loss’ of £25k for the
year, predominantly due to Turkish Baths income being below its
increased 2024/25 target. The company’s overall
projected deficit for the year has reduced in comparison to the
position reported at Q2, largely due to additional NYC subsidies
paid to the company during the quarter to offset the in-year income
shortfalls. Brimhams Active purely
operate services on behalf of the Council so the ‘loss’
reported within the Brierley Group summary relates to the subsidy
associated with running a Council service as opposed to a true
commercial loss.
2.8
Brimhams Active ceased trading on
30th November 2024 and services transferred into North Yorkshire
Council on 1 December 2024, therefore from 1 December onwards the
accounting for the services will be captured within the
council’s general fund. The services previously delivered
through the Maple Park commercial entity have also now
transferred back to NYC.
3.
Current Challenges
3.1
The main challenges within the Group
relate to resourcing, recruitment and retention of professional
staff, inflationary cost pressures - including loan financing costs
- and the delays in the development pipeline at Brierley
Homes.
3.2 The labour market continues
to be very difficult in all sectors, limiting a lot of businesses
ability to expand, with a significant rise in the number of
economically inactive people, leading to vacancies across the
portfolio. Resourcing issues within the Brierley Group are
exacerbated by the ongoing post Local Government Reorganisation
workload pressures and a lack of capacity within some
Council’s professional support service teams to assist with
the development of growth plans across the Group.
3.3 General inflation (RPI) is currently 3.6%
(Jan 25), down from highs of 14% in November 2022. Inflation has
had substantial impacts across all companies with particularly
impacts on loan interest, utilities, and overheads.
3.4
Brierley Homes’ scaling up of
the development pipeline and move to a hybrid development model
featuring direct contracting has necessitated the expansion of the
Brierley Homes delivery infrastructure. Additional Project Managers
with the appropriate skillset have been brought in to manage the
development of the sites, while back-office staff have also been
recruited. The company confirms that this delivery model is well
developed in terms of procedures, management and administrative
resources and, following a recent internal audit, further
procedures are being developed in line with the new delivery model
to ensure robust governance is in place.
4
Current and future areas of
development
4.1
North Yorkshire Highways (NYH) has
delivered works for a number of council functions outside of
highways. Vehicle maintenance activities, scaffolding works to
secure a fire damaged building, provision of CCTV and electrical
works to buildings, works to allow road adoption in ex district
housing stock, surfacing of car parks, bereavement service support
and works to secure funding for Skipton TCF are all additional to
the business-as-usual activities in maintaining the highways
network. The growth of NYH is being carefully controlled to ensure
the efficiencies, savings and flexibility provided to NYC is not
eroded by being overzealous, and this is a key focus for
NYH’s senior leadership team in planning for 25/26.
4.2 Yorwaste continues to explore
options to maximise current year landfill gas revenues through
continued investment in well optimisation and to review the
potential for investment in solar to mitigate the impact of the
future increases in electricity costs. The Company’s in-house
sales team has been strengthened to mitigate attrition in the
current challenging market conditions and also drive revenue
growth. Several options are also being progressed to optimise asset
maintenance and servicing to improve uptime and reduce costs.
4.3 NYES has placed
particular emphasis on the maximisation of training income this
year, focusing on high-volume, low-cost sales with significant
profit potential. This effort has paid off, with sales income
totalling £340k being generated in the year; representing a
70% uplift against the £200k achieved in the previous year.
Future developments within NYES include optimising the website for
search engine visibility, enhancing social media campaigns, and
refining customer feedback processes.
4.4 Many
companies are undertaking initiatives to drive cost efficiencies
and address recruitment issues as well as development of future
sales pipelines.
5
2024/25 Q3 Brierley Group Financial
Summary
5.1
The following tables set out the
full year forecast position for 2024/25 as at Q3 and Forecast
Variance to budget for North Yorkshire Council’s share of the
Brierley Group, along with the total value to NYC as shareholder of
the Brierley Group companies.
Table 1 –
Forecast Profit Before Tax and Variance to Budget by
organisation
Table 3 –
Brierley Group Shareholder Value
5.2
The above tables highlight a full
year forecast outturn pre-tax profit for the 2024/25 year of
£2.629m for the Brierley Group entities as at Q3
(£1.623m excluding performance on General Fund related
operations). Details by entity can be found in Appendix
A.
5.3 A total Shareholder Value of
£12.257m is forecast: categorised by group profitability,
margins on support service contracts and loan financing
arrangements, along with other Shareholder Value in the form of
financial benefits and cost savings which the Council derives from
the trading and operational arrangements that are in place with the
Brierley Board entities.
5.4 As stated in previous
financial reports, Align Property Partners has enjoyed strong
financial performance in recent years and the company’s board
of directors have resolved to pay a £1m dividend to the
Council as shareholder. The payment of dividends is a reserved
matter for the Shareholder Committee under the Shareholder
Committee’s Terms of Reference (paragraph 13), and the
Shareholder Committee is therefore requested to consider and
approve the attached Written Resolution at Appendix B. Once
approved, the Written Resolution must be signed on behalf of the
Council.
6
Recommendations
6.1 The Shareholder Committee are
requested to:
i)
note the report and the Brierley Group Q3 Financial Performance for
the 2024/25 year.
ii)
approve the Written Resolution at Appendix B for the payment of a
dividend of £1 million to The North Yorkshire Council by
Align Property Partners Limited.
ii) authorise the
Chief Executive (as Shareholder Representative) to sign the Written
Resolution and any other relevant shareholder resolutions relating
to this dividend.
Kerry Metcalfe
Assistant Director, Commercial,
Property and Procurement
Corporate Director -
Resources
Date: 01/05/2025
Presenter of Report – Kerry Metcalfe -
Assistant Director (kerry.metcalfe@northyorks.gov,uk)
Note: Members are invited to contact the author in
advance of the meeting with any detailed queries or
questions.
APPENDICES:
Appendix A – Company Updates
Appendix B – Written Resolution of Align
Property Partner Limited
APPENDIX A
North Yorkshire Education Services (NYES)
As at Q3 NYES were projecting a profit of £0.81m for the year
(after allowing for hub costs and centrally allocated overheads of
£1.87m). This represents a significant turnaround against the
trading loss reported in 2022/23, and the current updated draft
outturn position shows that the profit projection has improved
further in the final quarter, with trading surpluses well in excess
of £1m expected for the year.
Customer attrition due to
academisation poses a significant long-term threat to the business
model of some of NYES’ services. Increasingly, schools are
joining Multi Academy Trusts (MATs) that already have their own
provisions for professional support services. While bidding for and
winning such MAT contracts presents a growth opportunity,
accommodating the typical size of these MAT contracts may require
extra service capacity building and further development of our own
contract management expertise.
NYES has placed particular
emphasis on the maximisation of training income this year, focusing
on high-volume, low-cost sales with significant profit potential.
This effort paid off, with sales income totalling £340k for
the year; representing a 70% uplift against the £200k income
achieved in the previous year. The new website - NYES Training -
facilitates instant sign-up and credit card payment, enhancing the
user experience, and the initial website - NYES Info - drives
traffic to the new platform, boosting customer engagement. Future
developments within NYES include optimising the website for search
engine visibility, enhancing social media campaigns, and refining
customer feedback processes. These actions will further close
communication gaps and position the business for sustained growth
and increased profitability in the competitive education
sector.
NYnet
NYnet’s Q3’s draft position for the 24-25 outturn
indicates a forecast outturn profit of £398k, which is
broadly in line with the Q2 projection. Higher than budgeted sales
on diversified portfolio have contributed additional costs as these
sales are at lower profit margin.
Connectivity remains the largest contributor to NYnet’s
revenue and they have seen a steady increase in orders from private
sector customers as well as on diverse portfolio. They continue to
work on diversification of product offering to the private sector.
Whilst it is a difficult market to capture the sales team have seen
some promising leads.
First North Law
First North Law (FNL) performed well in Q3 and
continues to track ahead of budget in terms of both turnover and
profit. The historic issue with the sourcing of staffing resource
continues to improve with a new starter now in post and a recent
recruitment campaign yielding strong candidates; taking the
dedicated FNL resource up to 4 FTE.
The outlook remains positive for FNL, and they
are in talks with various organisations who are looking to procure
new legal providers in the near future. This would add to Barnsley
Council who are already a client of First North Law and who now
have an agreed SLA in place.
Brierley Homes
At the end of Q3 Brierley Homes was projecting a
net loss for the year of £2.1m, after taking account of
£2.3m financing costs and £0.9m in overheads. This
position has worsened since Q2 when a profit of £0.1m was
forecast for the year. The forecast outturn position is largely
driven by delays in the receipt of sales income, and associated
increases in the company’s financing costs.
The updated draft
outturn position for the company is still being worked through
however current projections anticipate that a further loss in the
region of £1m will accrue in the final quarter of the year
due to further delays in sales income and associated financing
costs; taking the total in-year projected loss for the company to
in the region of £3m.
The delayed sales are in part due to extended
defect works on three plots at the Marton Cum Grafton development
and extended design issues at The Paddocks, Great Ouseburn
site.
Direct contracting is now Brierley Homes’
main delivery method and the model is now being used for all sites
presently under active construction. Combined with the expansion of
the current development pipeline to five active sites and a further
eight in the extended pipeline, this brings several challenges
across a range of areas. These include the commissioning and active
management of multiple sub-contractors as well as enhanced
responsibilities around CIS, coupled with a substantial increases
in transaction volumes.
Brierley Homes are investing significant time
into refining the profile of sales and construction at new sites in
order to determine the optimum level of shareholder value and wider
shareholder benefits; whilst staying within the agreed NYC loan
facility and ensuring profiling is realistic in terms of project
delivery and cashflows. It is also of note that Brierley Homes are
now working with the Council to help contribute to the delivery of
affordable homes and the development of sites where financial
viability is difficult.
Brierley Homes has recently been the recipient
of an award for the sites at Marton Cum Grafton and Swainby from
the UK Property and the Housebuilder Awards.
Align Property Partners (APP) and
Align Property Services (APS)
A new company, (Align Property Services Ltd APS), began operations
on 1 December 2023, to address the turnover growth limitation faced
by Align Property Partners Ltd. (APP). As a single entity, APP was
restricted to undertake no more than 20% trading with third parties
outside its parent local authority to maintain Teckal compliance.
The Teckal contract has now been transferred to the new company
APS, allowing APP to shed its Teckal status and free to pursue its
commercial aspirations. The financial results in this report
encompass the combined performance of both companies.
Align are
projecting a profit of £1.58m and a shareholder value to NYC
of £1.62m for the year, representing strong performance and
profitability within the companies. A £1.0m dividend payment
has been proposed by Align during 2025 in recognition of their
continued strong financial performance.
Recruitment and
retention of appropriately skilled staff in a competitive
marketplace continues to be a challenge as Align continues to
operate in newer markets.
Yorwaste
Yorwaste is
projecting a pre-tax profit of £1.65m for the year;
£1.282m of which relates to NYC’s share of the company.
The full year forecast represents an improvement of £1.243m
against the original profit target.
The positive
variance was partly due to strong commercial net revenue with
collections revenue, third party tipping and third party recyclate
processing all being strongly favourable to expectations. Yorwaste
have recently won 2 tenders worth £200k, including one from a
major competitor.
Total operating
costs were lower in real terms compared to the same period last
year driven by cost efficiency measures and increased asset
optimisation which has improved significantly over the past few
years, so the company is now carrying greater volumes on fewer
vehicles.
Whilst commercial
collections have performed well, wider market conditions are
expected to see increasing price challenges arising against the
backdrop of an economic slowdown. These same market conditions will
present added cost pressures for Yorwaste over the coming year and
beyond and the company continues to explore opportunities to help
mitigate their impact.
Veritau
As at Q3 Veritau
is projecting an NYC share of pre-tax profit of £8k for the
year. Forecast fee income is higher than the original budget
due to the addition of two new member councils and continued growth
in external work. A broadly similar increase is anticipated in the
cost of sales compared to the original budget.
The main focus for
the business over the last two quarters has been the creation of
Veritau Public Sector Limited (VPS) (the new Teckal company), which
started trading on 1 August 2024.
Recruitment and
retention remains a key risk to the company. To maintain capacity
within the business Veritau has run a successful recruitment
campaign in Q3 for graduate trainees, Information Access Officers,
and Information Governance Support Officers. They have also
completed a number of internal promotions
North Yorkshire Highways (NYH) (April to November Only)
As at Q3 NYH is projecting a pre-tax profit of
£75k for the year, which is broadly in line with budget and
the Q2 projection. The company will deliver an estimated
shareholder value to NYC of £856k, predominantly due to the
cost savings and efficiencies that NYC derives from the NYH trading
arrangements, as opposed to delivering works through external
contractors.
NYH is performing well despite the challenges of
recruitment and budgetary pressures and is increasingly being seen
as the organisation within Brierley group that can deliver NYC
construction and maintenance works. NYH is also focussed on
establishing efficient processes so that efficiency savings can be
realised by NYC.
There were several weather events and winter
maintenance activities during 2024, therefore Q3 was a very busy
time for the company. The drive to complete as much of the capital
programme as possible by November, and reduce any open road works
during the Christmas period, has largely gone well.
Bracewell Homes
Bracewell Homes is
forecasting a profit before tax of £300k for the year and a
shareholder value to NYC of £335k. The pre-tax profit
projection shows a slight improvement against the position reported
at Q2, predominantly due to a reduction in interest payable
associated with an improved cashflow position.
Maple Park
Maple Park services were transferred back to the council on 1
October 2024, with Hambleton Holdings and Maple Park LLP being
wound up. The draft forecast pre-tax profit position for 2024/25 is
currently reported to full-year budget. The Company’s
year-end finance position is still being consolidated and will be
reported as part of the final outturn.
Brimhams Active
Brimhams Active ceased trading on 30th November 2024, with all
Brimhams Active’s services transferring into North Yorkshire
Council on 1 December 2024. As a result, from 1st December onwards,
accounting for the services will be captured within the
council’s General Fund.
The figures quoted within this report reflect the company trading
position for the period 1 April 24 to 30 Nov 24 and are currently
draft as the closing position is still being finalised. The
£25k budget deficit detailed within this report has been
adjusted to take into account additional management charges that
NYC has been charged during the trading period, so is not a direct
comparator to the position that was reported at Q2.
Income from the Turkish Baths and swimming lessons continued to be
below budget for the year, however this is offset by strong
performance on health suite memberships and corporate
memberships.
Company
number 10385861
PRIVATE COMPANY LIMITED BY
SHARES
WRITTEN RESOLUTION
of
ALIGN PROPERTY PARTNERS LIMITED
(the ‘Company’)
2 May 2025
Under Chapter 2 of Part 13 of the
Companies Act 2006, the directors of the Company propose that the
following resolution is passed as an ordinary resolution (the
‘Resolution’).
WRITTEN RESOLUTION
1.
To declare a dividend of
£1,000,000 (one million pounds) to The North Yorkshire
Council for the year ended 31 March 2024.
AGREEMENT
Please read the notes at the end
of this document before signifying your agreement to the
Resolution.
The undersigned, a person entitled
to vote on the Resolution on 2 May 2025, hereby irrevocably agrees
to the Resolution:
|
Signed by the Corporate Representative of THE
NORTH YORKSHIRE COUNCIL:-
|
.....................................................................
|
|
Date:
|
.....................................................................
|
NOTES
1. If you agree with the
Resolution, please indicate your agreement by signing and dating
this document where indicated above and returning it to the Company
using one of the following delivery methods:
·
By
hand:
delivering the signed copy to: Legal Services, County Hall,
Northallerton, North Yorkshire, DL7 8AD.
·
Post: returning the signed copy by
post to:Legal Services, County Hall, Northallerton, North
Yorkshire, DL7 8AD.
·
Email: by attaching a scanned copy of
the signed document to an email and sending it to
qingzi.bu@northyorks.gov.uk. Please type "Written Resolution
dated 2 May 2025" in the email subject box.
If you do not agree to the
Resolution, you do not need to do anything. You will not be deemed
to agree if you fail to reply.
2. Once you have indicated your
agreement to the Resolution, you may not revoke your
agreement.
3. Unless by 31 May 2025,
sufficient agreement is received for the Resolution to pass, it
will lapse. If you agree to the Resolution, please ensure that your
agreement reaches us before or during this date.