Recommendations: The ShareholderCommittee is asked to:
i) note the Annual Report and Brierley Group Business Plan summary 2021-2023 at Appendices A & B respectively;
ii) recommend to the Chief Executive that under his emergency delegated powers he accept and approve the Business Plans in Confidential Appendix C.
The report of the Assistant Director for Strategic Resources, providing an annual financial and performance report for 2020/21 for the companies that make up the Brierley Group, together with their individual Business Plans.
Michael Leah, Assistant Director for Strategic Resources introduced the report, providing an overview of performance and highlighting the achievements and challenges for the individual companies over the last year. He drew members’ attention specifically to the profit before interest as detailed in the report, which was less than expected for the year, but noted that profit was not the sole objective of the Brierley Group and that benefit had been derived in other forms such as interest on the loans made to the individual companies.
The negative impact of Covid on the Group was acknowledged. In particular, the drop in revenue for NYES due to limited trade with schools throughout the lockdowns, and the impact on Align Property Partners as a Teckal company who did a majority of it’s trading with public bodies and schools.
however, it was noted the Group overall had shown a reassuring level of resilience throughout the pandemic and had held up well. Whilst 25% of the Groups employees had been on furlough in 2020/21, the quality of service provided had not been affected. Attention was drawn to a number of highlights from the past year:
· In regard to Brierley Homes, it was noted that its pilot site at Thorpe Willoughby had been completed resulting in a 20% gross profit from the site, and that a further three pipeline sites were now underway, with a fourth having just received planning permission.
· In regard to Yorwaste, it was noted that the company had continued to manage and operate the household recycling centres through the various states of lockdown, whilst maintaining appropriate health and safety measures.
· Finally in regard to NYnet, it was noted the company had continued to deliver the ‘local for fibre network’ despite a number of potential issues through the year providing a platform for the company to grow from.
· It was confirmed that the governance arrangements of the Group had been reviewed, and had been found to be appropriate in respect to how it compared with both other councils’ commercial operations and best practice guidance.
· The launch of NY Highways was scheduled for 1st June 2021
In response to some adverse press about preferential rates being given to the companies by the County Council, it was confirmed that this was not the case. All loans were on a commercial rate providing a greater return than leaving the cash in the bank. Michael Leah confirmed the rates were different for each company based on the level of risk and the financial health of the company.
In response to a question from County Councillor Mike Jorden, Michael Leah confirmed that Brierley Homes was the main contributor to the 639k reported loss over the last year, in that it was currently in construction phase meaning expenditure was greater than revenue, which would change once the properties build were sold for profit. For other Companies, the Group was being as tax efficient as possible by offsetting at a group level any losses against the more profitable companies.
It was suggested that the profit and loss for the 2020/21 year needed to be considered in the context of the build-up of profit from previous years, as part of the rhythm of commercial activity.
It was also suggested the shareholder value from what the companies were delivering needed taking into consideration - the income stream from the commercial rates on the loans, the tonnage going into Allerton Park which provided a more advantageous rate for the County Council etc. It was noted that shareholder value in 2020/21 was approximately £5.2m.
In the context of the pandemic, Richard Flinton, Chief Executive Officer confirmed the diversity of the Group had proved helpful, with the range of its trading activities placing the Council in a better position than many other Councils.
County Councillor Don Mackenzie confirmed he remained optimistic regardless of the difficult year. He noted the expertise being gathered in the companies and referenced NYNet, which helped the Council manage the Superfast North Yorkshire programme and the local full fibre network’s gigabit system.
In regard to Brierley Homes, County Councillor Derek Bastiman drew attention to the significant rise in housing prices in North Yorkshire this year which would deliver a higher rate of profit in the longer term. It was suggested that Brierley Homes should be seen as a disruptor to the market by encouraging other building companies to move more quickly in developing land.
In regard to the general principles of governance, County Councillor Gareth Dadd noted how other Authorities had not been as open and transparent in their commercial dealings as perhaps they should have, and was therefore pleased to note the positive findings from the review of the Brierley Group’s governance arrangements.
Michael Leah, Assistant Director for Strategic Resources went on to provide a summary of the Group’s Business Plans noting they were contingent on how the lockdown measures continued to ease and the speed at which the country’s economy recovered. He drew attention to the current market conditions and the indicators in the report giving some level of confidence. He also noted the substantial shift from physical sales to online sales, something the Brierley Group would need to learn from, and the additional funds being made available by the Government.
Across the 3-year plan period, he noted the focus on Health & Safety Protection and environmental performance. He confirmed the Group was aligning to the Shareholder’s ambition of becoming carbon neutral by 2030, which would require some significant changes for some of the companies. He also drew attention to the last table in Appendix B showing the numbers that underpinned the consolidated position for the Group.
Finally, as it was a new company, Michael Leah provided a more detailed overview of the Business Plan for NY Highways, which included a focus on transition in the first year, to be used as a platform for quality improvements going forward.
Members also noted the changing market place arising from an increase in the number of academies going forward and a rise in the number of teaching academies providing free school improvement services to some schools. It was confirmed that work was underway to develop an academy offer, and to expand NYES service delivery to beyond North Yorkshire.
Members of the Shareholder Committee thanked officers for the update. They noted the Brierley Group annual report in Appendix A and the Brierley Group Business Plan summary 2021-2023 in Appendix B, and agreed to recommend to the Chief Executive Officer that using his delegated powers, he accept and approve the Business Plans in Confidential Appendix C.
The Chief Executive Officer took all relevant information into account, including the views of the Shareholder Committee members and
Resolved: To accept and approve the Business Plans in Confidential Appendix C.