Annual Report & Financial Statements 2024 Anchor Hanover Group
anchor.org.uk Later life is for living
1 2 3 4 5 6 7 Contents Directors’ Report Financial Statements
Chair and Chief Executive’s Statement
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Strategic Report including Operating and Financial Review Corporate Governance Report Board, Directors and Advisors
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29 49 51 57 63 64 65 66 67 68 69 70 71
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income Association Statement of Comprehensive Income Consolidated Statement of Financial Position Association Statement of Financial Position Consolidated Statement of Changes in Equity Association Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Anchor refers to Anchor Hanover Group and its subsidiaries throughout this report unless otherwise stated. Anchor Hanover Group is a charitable housing association registered as a society under the Co-operative and Community Benefit Societies Act 2014, No. 7843 and registered with the Regulator of Social Housing, No. LH4095. The registered office is Anchor Hanover Group, 2 Godwin Street, Bradford, BD1 2ST. 2 Anchor Hanover Group Annual Report & Financial Statements 2024
Chair and Chief Executive’s Statement
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Inflationary pressures and economic turbulence continued to impact on the cost of living for individuals during the year. These pressures were no different for Anchor and impacted costs such as construction and repairs and maintenance. Our scale and experienced management team position us well to manage these challenges. Just over 10 million people over the age of 65 currently live in England. This is expected to increase by another 4 million within the next 10 years. We are committed to increasing the number of homes we provide through development and care home acquisition. Through our development programme, we have a significant pipeline and anticipate delivering an average of at least 500 homes a year over a rolling 10-year period. This is in addition to increasing the number of homes we provide for people in residential care. During the year, we achieved practical completion for a total of 573 new homes at nine locations across England. Significant growth in care has been achieved through the acquisition of 14 new care homes (951 beds) since November 2022, two of which opened in the year. The Mill House, in Skipton, provides residential and dementia care for up to 102 residents while Marsh Farm Manor, Royal Wootton Bassett, serves up to 66 residents. We now own or operate 121 care homes. Anchor's reputation for providing high quality services, coupled with strong underlying demand means occupancy is within 1.0% of pre-pandemic levels. At the date of this report, occupancy levels were 98.7% in our rented housing and 88.1% in our care homes. Enhancing residents’ lives Residents’ voices are crucial in influencing how we work across all our services. We work hard to ensure the voices of residents, and their loved ones, shape how we work and the services we provide. Members of our Residents’ Council, Scrutiny Panel and the various other residents’ groups – including the Residents’ Voice Panel - provide hugely important input into what we do and how we do it. Residents’ concerns about climate change also led to the formation of a new group - the Residents’ Environmental Forum. This forum focuses on addressing environmental issues within our communities and has a direct link to the Residents’ Council, helping inform Anchor’s environmental strategy. Our residents’ views also informed our work with the think tank Demos on the Platinum Pound report about the economic benefits of supporting older people to remain in or return to the workforce. We commissioned the report after residents identified the topic as one with a significant impact for older people. Both Conservative and Labour politicians expressed strong interest in the research, and we continue to urge politicians to do more to support people to contribute in both paid roles and through volunteering in later life. With our existing regional repairs contracts ending in 2025, we have been working with housing residents to help inform our Chair and Chief Executive’s Statement A robust financial position, strong governance and a commitment to driving value for money for our residents mean we are well placed to support continued demand for high quality housing and care. 4 Anchor Hanover Group Annual Report & Financial Statements 2024
future approach. At the same time, our ‘Don’t walk by’ surveys are supporting colleagues to work together with residents to understand and prioritise what matters most to them at individual locations. This dual approach will help us ensure that the services we deliver are good quality and good value for money. You will read more about our Be Wise financial inclusion service and Resident Support Fund in the Operating and Financial Review. The sector is rightly seeing increased legislation and regulation to safeguard residents' interests and safety. This includes the introduction of updated Consumer Standards, Tenant Satisfaction Measures and growing legislation around building safety. A commitment to co-development with residents, coupled with robust governance meant we were well-positioned for this and future changes. You will read more about how we perform against the new Tenant Satisfaction Measures in the Operating and Financial Review. Supporting colleagues In a sector facing high staff turnover and continued recruitment challenges in some areas, we continue to differentiate ourselves positively as an employer. We have maintained our membership of the Living Wage Foundation paying at least the real living wage, as well as maintaining appropriate differentials for more senior roles. We also built on a comprehensive range of benefits for colleagues. This included introducing Help@Hand, which offers colleagues 24/7 access to remote GP appointments. We also extended free eye tests to all colleagues regardless of whether they use a VDU, particularly benefitting our care colleagues. Building on previous years’ work on diversity and inclusion, Anchor was accredited during the year as a Menopause Friendly employer. The accreditation from Menopause in the Workplace was given in recognition of Anchor's commitment to inclusive practices and supporting colleagues experiencing perimenopause and menopause. Our support for colleagues’ wellbeing is clearly valued, as evidenced by the fact that Anchor was included in Indeed’s Better Work Awards as one of the top 10 companies for work wellbeing in the UK. Financial results Turnover for the year to 31 March 2024 was £628.7m, an increase of 13.2% on the previous year. This in part reflects the growth in our care homes business along with increased rents and higher service charges from our rented housing. The latter reflects the higher cost of utilities. We received lower proceeds from property sales in the year arising from a combination of delays in practical completions and more challenging market conditions, and we recognised an impairment charge of £9.6m at one scheme where the previous contractor had gone into liquidation. This, alongside the impact of rising cost inflation in the year, had a dampening effect on our operating surplus which at £36.7m was £0.8m lower than the previous year. Our operating margin was 5.8% compared with 6.8% in 2023 and we recorded EBITDA MRI interest cover of 155.3% (2023: 180.2%). EBITDA MRI is defined within the table 'A summary of Anchor’s financial results over the past five years from all its activities' on page 14. Our balance sheet remains strong with total net assets at 31 March 2024 of £592.3m and a low level of gearing at 28.9% (2023: 28.5%). We continue to maintain high levels of liquidity to support our Business Plan growth, with £144.6m (2023: £185.6m) of undrawn facilities at the year-end. We were pleased that, in March, S&P Global Ratings affirmed an A+ stable long-term issuer credit rating for Anchor. Anchor also
Key Performance 1 Chair and Chief Executive’s Statement
Turnover £ 628.7 m
Operating Surplus £ 36.7 m
2021 2022 2023 2024
£628.7m
£37.5m £36.7m
2021 2022 2023 2024
£555.5m
£52.0m
£528.2m £526.2m
£46.3m
£ 1,490.0 m Net Book Value of Housing & Care Properties
£ 1,631.9 m Total Assets Less Current Liabilities
£1,490.0m
2021 2022 2023 2024
2021 2022 2023 2024
£1,580.5m £1,631.9m
£1,387.6m
£1,201.3m £1,210.7m* * Restated
£1,391.3m
£1,350.6m
84.1 % CQC rated good or outstanding 2023: 85.6%
88.1 Care homes occupancy 2023: 86.9%
98.7 % Rented occupancy 2023: 98.7%
%
We are very grateful to the many partners and stakeholders who work with us for the benefit of residents. ” ”
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1 Chair and Chief Executive’s Statement
holds G1/V1 gradings from the Regulator of Social Housing - the highest possible ratings for governance and viability. Strategy Our commitment to maintaining a consistent corporate strategy supports the continued financial strength and resilience of the organisation through on-going economic and political uncertainty. This has enabled us to make further progress against the four strategic themes of our Business Plan: more and better homes; more opportunities for colleagues; being more efficient; and being more influential on behalf of older people. During the course of the year, we further refined our housing development strategy to concentrate where the need is greatest and the supply least, namely social and affordable housing, extra care housing (independent communal living supported by dedicated medical and catering offerings) and care homes. Our focus will now be on 70% social housing (including affordable housing where appropriate) and 30% older people’s shared ownership (OPSO). We will also be concentrating on a selected group of local authorities with whom we intend to develop closer partnerships. At a time when housebuilders are cutting the number of homes they are building, we believe there is a good opportunity for well-capitalised housing associations such as Anchor to be counter-cyclical in our housing development. However, better clarity from the UK government on social rent rates is necessary for those of us who are investing on a 30-year timescale; ideally, we would like to see these decided for a 10-year timeframe. While our eventual aim is to grow our care home operations from its current size of 121 to 140, we have also taken into account the more challenging post-COVID operating environment for the sector. Accordingly, in the near term we intend to concentrate our efforts on our existing portfolio with a strategy of improving financial performance while maintaining high standards of care quality and customer satisfaction. We are also focused on achieving strong colleague recruitment, retention and development as well as making efficiencies by improving our workforce planning. This in turn reduces the need to use agencies, giving our residents a more consistent team delivering services and reducing overall staffing costs. We are also introducing new technology which digitises and speeds up some of the processes in our care homes, enabling colleagues to spend more time with residents. Our stock condition survey programme continues to progress and add valuable data to enable more accurate, prioritised investment planning. We have undertaken an accelerated programme to update our stock condition data. As at 31 March 2024, more than 80% of our stock condition data was less than two years old. Our strategic review programme has now covered 38% of our portfolio, and enables us to better understand our existing assets and identify opportunities for regeneration. We have plans to transform our housing operations, how we deliver repairs and planned works, and changing how we manage development to improve the certainty of delivery of new homes. Introducing more technology to enable our services will help us to become more efficient for residents. A more efficient and consistent property service will also benefit all our residents and help achieve our carbon reduction aims. You will read more about our work to procure new repairs and asset investment contracts in the Strategic Report. 6 Anchor Hanover Group Annual Report & Financial Statements 2024
More than 1,000 colleagues and residents are already benefiting from new Wi-Fi, as part of our Connected Properties project to roll out Wi-Fi to all our rented housing and care locations. All our care homes are expected to have Digital Care Planning by mid-August 2024. We are making strong progress on retrofitting more than 300 of our homes with £2.5 million in funding accessed through the Social Housing Decarbonisation Fund. Board and senior management changes On 1 September 2023, we were pleased to welcome two new Non-executive Directors to Anchor’s Board. Elizabeth Froude has been in the housing sector for almost 20 years and worked for large and complex organisations in several parts of England. She is currently Group Chief Executive at Platform, which operates coast to coast through the Midlands. Fred Angole is Finance Director and Deputy Chief Executive of YMCA St Paul’s Group, a supported housing provider that specialises in providing accommodation and wellbeing services to vulnerable young Londoners. He is also a Non-executive Board member and Chair of the Audit & Risk Committee at Notting Hill Genesis Housing Association. In May 2024, we welcomed Julia Mixter as the new Executive Director – Business Services. Julia joined us from Raven Housing Trust. As Director of Transformation at Raven, she led an award-winning multi-year business transformation programme to improve services to customers, drive value for money and reduce operational risk and waste. We would like to express our thanks to Richard Petty, Non- executive Director and Kate Smith, Executive Director – Business Services for their services to Anchor. Richard stepped down from the Board at the end of his term in September 2023 and Kate left to become CEO of another housing association in January 2024. Board visits and engagement The non-executive directors have been actively engaged with the organisation throughout the year, participating in our five committees: Audit and Risk, Service Quality, Asset Investment and Development, Nomination and Remuneration, as well as attending away days with senior management. Non-executive directors visited more than 150 locations across Anchor in the year to hear directly from residents about the issues that matter most. These visits are extremely useful in hearing residents’ concerns first hand and enabling the Board to identify service areas which can be improved or enhanced. They also help Board members to verify that the strategies and policies being set by the Board have what is important to residents at their centre. Thank you We are very grateful to the many partners and stakeholders who work with us for the benefit of residents. Special thanks also to the many residents who volunteer their time and ideas to support our continuous improvement efforts. Thank you, too, to all our colleagues, whose compassion, resilience and teamwork are essential in delivering the services on which our residents depend.
Christopher Kemball Chair
Sarah Jones Chief Executive
Strategic Report including Operating and Financial Review
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Strategic Report including Operating and Financial Review Anchor is England’s largest provider of specialist housing and care for people in later life. We are proudly not-for-profit, which means any surplus we generate is reinvested into our properties and services for the benefit of current and future residents, and not distributed outside the organisation. We manage more than 35,500 social rented units, 12,500 leasehold units and 121 care homes. We have 60 years of experience behind us and, with our team of more than 10,000 colleagues, we now serve more than 65,000 customers across 85% of local authority areas from almost 1,700 locations across England. Anchor has an A+ (stable) credit rating and is rated as G1/V1 by the Regulator of Social Housing, the highest possible ratings for Governance and Viability. We have accreditation as a Living Wage Employer, and as a Gold Standard Inclusive Employer. We are committed to providing all residents with the right level of care and support, where and when it is required, and offer choice to older people across a range of tenures and price points, including; Rented housing: • Socially rented specialist housing for older people • Extra-care: Specialist rented housing with on-site care provision, provided by a Care Quality Commission (CQC) registered third-party provider Homeownership: • Housing for homeowners in later life on a leasehold basis • Independent living: Specialist housing with CQC registered on-site care provision provided in-house • Villages: Later life communities with on-site retail and leisure facilities, home care and/or a care home. Care homes: • Specialist residential care for older people, including those living with dementia, both private fee payer and local authority funded provision.
ACHIEVING MORE TOGETHER The year ending March 2024 was the fourth year of progress against our Business Plan of 2019. We remain committed to its four key themes, the ‘Four Mores’: 1.More, and better, homes where people love living in later life • We are committed to delivering an average of at least 500 quality homes per year for people in later life. During the year to 31 March 2024, we achived practical completion of 573 new homes and started on-site with a further 419. • During the year we acquired two additional care homes. We disposed of four care homes through a mutually agreed lease exit and sold our freehold interest in one other. Our portfolio as at 31 March 2024, was 121 homes, the fourth largest portfolio in England and the largest not-for-profit care home provider. • Our accelerated programme of updated stock condition surveys commenced May 2022. As at 31 March 2024, 874 rented locations (79%) and 345 leasehold locations (83%) had been re-surveyed. Our focus in 2023/24 was on our leasehold portfolio, and we completed stock condition surveys on 345 locations (88%). The data from these surveys will inform future investment decisions, helping us to make sure our properties are kept in good order for our residents to enjoy. 2. More opportunities for colleagues in career development and reward • We were delighted to be the first housing and care provider to be awarded Gold Status in the 2023 Inclusive Employers Standard. Anchor is only the third organisation of any type to achieve this. We strive to be best in class in our approach to diversity and inclusion, and we have established thriving colleague networks to promote the interests of a number of underrepresented groups. • Over 500 colleagues took part in our Leadership Pathways programme and recruitment for the next cohort for our graduate scheme has commenced. • More than 400 colleagues undertook apprenticeship programmes and our Reverse Mentoring programme, supporting our diversity and inclusion strategy, included 11 senior leaders.
Units owned and managed
Year ending 31 March 2024
Year ending 31 March 2023
35,386 6,600 10,537 1,417 226 7 54,173
35,464 6,447 10,501 1,579 230 38 54,259
Housing for Older People Care (rooms) Leasehold properties Low-cost homeownership General needs* Non-social rented* Total
* Changes to general needs and non-social rented properties were due to reclassification rather than new properties being built/acquired.
8 Anchor Hanover Group Annual Report & Financial Statements 2024
2 Strategic Report including Operating and Financial Review
residents 65,000 We serve more than
across almost locations 1,700 in over 85% of local authorities in England
in almost 55,000 homes
More than colleagues 10,000 are employed by Anchor
3. More influential by sharing our frontline experiences and thinking with policymakers to effect improvements in the way older people are supported in social care and housing • We had several opportunities to engage with members of the Older People’s Housing Taskforce and were very pleased to show task force Chair Julienne Meyer around Runnymede Court in Roehampton. We urge government to now move quickly to publish and act on the task force’s findings to boost suitable housing options for older people. • We worked with think tank Demos to launch the Platinum Pound report on the economic benefits of supporting older people to remain in or return to the workforce. We commissioned the report after residents identified the topic as one with a significant impact for older people. Both Conservative and Labour politicians expressed strong interest in the research, which was reported on by publications including The Times, Sunday Express and Mirror, and we continue to urge politicians to do more to support people to contribute in both paid roles and through volunteering in later life. • We continued to build effective working relationships with politicians from the major parties. Among visits to Anchor locations by MPs, Chief Executive Sarah Jones and Managing Director – Care Services Rob Martin were
delighted to meet previous Care Minister Helen Whately at Canterbury House care home in Faversham so she could see first-hand how colleagues are delivering high standards of care. Sarah was also very pleased to have met with Housing Minister Matthew Pennycook among several Labour MPs in the course of the year. 4. More efficient by challenging ourselves to innovate and do things better We prioritise projects which will make our systems and processes more efficient. As well as tendering for new contracts, we have been redesigning our systems and processes and will introduce new technology. Our residents have been involved in the tender process and helped us shape a service which is going to work well for them. We have divided our properties into regions and invited competitive tenders from third party contractors, with the new contracts due to take effect early in 2025. We will be establishing a wholly owned direct labour subsidiary in the North East to trial this method of delivery. We believe these steps will enable us to better manage the performance of suppliers and contractors, ensuring we are getting best value for residents. As well as major projects like repairs and planned investment, all teams in Anchor are encouraged to
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implement new technology and ways of working which make our services more efficient. We have a series of principles which any change project must comply with: • Measurably add value. • Align with our risk appetite and golden rules. • Support self-service. • Support “freedom within a framework”. We have ambitious plans to transform the way we do business so that our systems and processes are modern and efficient, offering a great experience and value for money for our residents. We have agreed strategies and plans to achieve this, but as with any major transformation for a large organisation, implementing these can take longer than expected. We have spent some time during the year reviewing our priorities for what needs to change and putting some new governance arrangements in place to oversee the programme. In next year’s report, we expect to be able to tell you more about how we have modernised and transformed our services. External environment We continue to see significant challenges to our residents and colleagues, our organisation, the sectors in which we operate, and the wider economy. War and political changes on a global scale, alongside the effects of the United Kingdom having left the European Union, have continued to create inflationary pressure. This has been most keenly felt in energy costs, but has also affected construction, repairs and maintenance, and our ability to recruit and retain colleagues in parts of our business. Economic turbulence has impacted on everyone’s cost of living and people have less disposable income. The social housing sector has been influenced by significant regulatory and legislative shifts during the year. The Regulator of Social Housing has consulted on and introduced new Consumer Standards. Providers have been required to publish their Tenant Satisfaction Measures (TSMs) for the first time during 2024. This should provide more transparency about the sector’s performance and, in time, drive up standards. The Housing Ombudsman continues to be active in championing good complaint handling performance and highlighting areas for improvement in the sector. A section later in this report highlights Anchor’s evolving approach to complaints handling. The introduction of the Building Safety Act 2024 places new requirements on landlords in relation to the design, construction and management of high-quality homes. Anchor is reviewing its compliance and building safety strategy, structures, policies and procedures, engagement with residents and contract management arrangements. These reviews will ensure that Anchor can provide robust evidence that it complies with its new duties and responsibilities. Whilst managing these short and medium-term priorities, organisations are also having to consider their obligations
for sustainability and net zero carbon, and the ongoing demand for new housing. Against this backdrop, Anchor’s values, strong financialfooting and robust governance provide the framework that allows us to continue to deliver on the objectives of our Business Plan. LIVING BY OUR VALUES Our values • Accountable: We are positive about our work, each taking responsibility for doing a brilliant job, and we focus on and celebrate our successes. We are personally accountable for our actions and keep our promises. • Respectful: We care about people and show kindness, putting excellent customer service at the heart of what we do. We listen and encourage a variety of perspectives to be shared. We are inclusive and value everyone for who they are in helping us succeed as an organisation. • Courageous: We demonstrate courage to shape a better future by constantly seeking to move forward, improving, and innovating in our services to make a difference. We break down barriers and build connections through collaboration. We’re pioneers in our services. • Honest: We show integrity and demonstrate openness and transparency in everything we say and do. We are reliable, keep things simple and have honest conversations about what matters. Customers and colleagues trust us to keep to our word. Cost-of-living support - residents Providing value for money to our residents continues to be a top priority for Anchor. Our residents are experiencing higher costs of living largely due to external factors, so we are doing what we can to minimise the impact of this. For the year ending March 2024, we set and achieved our target that no resident paying for their energy via Anchor would pay more than the equivalent of the government’s Energy Price Guarantee, so that our residents were not disadvantaged by Anchor’s ineligibility for government support. We have written to residents whose utilities are fully included in their service charge to advise how they can claim from the Energy Bills Support Scheme (EBSS) which, along with Government Winter Fuel Payments and Pensioner Cost-of-living Payments (dependent on individual circumstances), can help with the cost of living. The rent we charge in our rented housing is controlled by a formula set by central government and usually increases each April in a calculation linked to inflation. For rent increases from April 2024, the Board carefully considered the case for increasing rents and the impact this would have on residents. We also had to take into account the fact that in April 2023, Anchor chose to apply 7% instead of the maximum potential increase of 11.1% and the impact this has on our financial plans. The decision to
10 Anchor Hanover Group Annual Report & Financial Statements 2024
We are in the process of restructuring how we manage complaints at Anchor. We ran a pilot during 2023 where we centralised the complaints function in one of our geographical areas. The pilot was a success. In the first two months, 67% of customers indicated they were satisfied with their complaint experience compared to other regions where 39% of customers were satisfied. We therefore decided to move to a centralised complaints function for the whole of Anchor. This will be fully implemented during 2024. Data and analysis of complaints is reviewed by operational teams, the Safeguarding Committee, the Service Quality Committee and the Board. This governance helps us to ensure that lessons learned from complaints are captured and appropriate action taken to make improvements to our services. We recognise that complaints handling in the housing and care home parts of our business need a slightly different approach. Complaints in care homes are more often dealt with “in the moment” by the colleagues present, but can still be escalated through our central complaints team. FACING THE FUTURE The demand for Anchor’s services will continue to be strong into the future. Over 10 million people are aged 65 and over in England today, representing 18% of the population. The number of people aged 65-79 is predicted to increase by nearly a third (30%) in the next 40 years.¹ Later life is not always lived in good health or with financial security and so the demand for good quality affordable housing for older people will increase. Anchor is well placed to support the demand from current and future customers for the long term, supported by its strong foundation in finance and governance, and its clear and consistent strategy. This will involve some significant changes over time, particularly in our use of technology to be more efficient, improve our services, make them more affordable, and free up resources that can be better deployed in other ways. Our plans to do this are underway. Please see the Operating and Financial Review for further details. Sustainability will continue to be a focus for us, and not only in respect of our buildings – our sustainability is an important factor in our ability to recruit and retain colleagues to deliver our services and support our residents. Please see the Corporate Governance Report for further details. Recent years have demonstrated that we can continue to manage positive strategic change effectively despite external challenges and, together with residents and colleagues, we are confident that we can continue to achieve the targets that we set ourselves, and those set by others. 2 Strategic Report including Operating and Financial Review
apply the full increase available of 7.7% from April 2024 will enable Anchor to continue delivering its strategic objectives, including building new homes. Cost-of-living support - colleagues We value the commitment and dedication of our colleagues who provide great services to the people who live with us, and we were pleased to be able to invest in them as they too face cost-of-living challenges. Anchor has been paying colleagues the Real Living Wage since 1 December 2021 and in November 2022 we became the largest housing and care provider to attain accreditation as a Real Living Wage Employer from the Living Wage Foundation. We have committed to paying colleagues the Real Living Wage, which is higher than the National Minimum Wage, for the foreseeable future and are proud of our commitment to ensure that people working in housing and social care are appropriately rewarded for their hard work. The National Living Wage from 1 April 2024 is £11.44 per hour for age 21 and over. The Living Wage Foundation rates are £12 per hour or £13.15 for London. Our commitment to paying the Real Living Wage forms part of our Employer Value Proposition and we aim to be one of the best places to work in the UK, ensuring we can recruit and retain the best people in a highly competitive market for talent. Our employee surveys show that we have a highly engaged workforce, scoring 83% last year with a participation rate of 78%. Through our ‘Being Well’ approach to colleague benefits, we offer guidance and tools to support mental, physical and financial wellbeing. Colleagues have access to a wide range of benefits including everyday shopping discounts, a 24/7 colleague helpline, salary advances and digital GP appointments. Damp, mould and condensation There has been no shortage of media coverage in the last year on the importance of landlords dealing with damp and mould cases appropriately and promptly. There are severe health and safety implications of failing to do so. Details of how Anchor manages such cases can be found in the Operating and Financial Review. The Audit & Risk Committee has, in the last year, reviewed Anchor’s policy for dealing with damp, mould and condensation, to ensure our arrangements and controls are appropriate. Complaints and customer satisfaction Anchor is supportive of the Housing Ombudsman’s quest to improve residents’ lives and landlords’ services through complaints. Anchor has completed its self-assessment against the Complaint Handling Code and this is published on our website www.anchor.org.uk/existing-residents/ resident-publications. You will also find our Complaints and Service Improvement report there, which tells you more about our performance.
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1 Centre for Ageing Better – The State of Ageing 2023-4
Operating and Financial Review
Turnover from property sales was £14.2m, a decrease of £10.5m from the previous year’s turnover of £24.7m. This was as a result of delays in practical completions and more challenging market conditions. During the year we recognised an impairment charge of £9.6m at one scheme arising from additional costs following the liquidation of the principal contractor. Elsewhere we were pleased to have the opportunity to convert a scheme in Uxbridge from outright sale to social rent to increase the supply of much-needed affordable homes in the capital, with the strong support of the London Borough of Hillingdon and the Greater London Authority. Our balance sheet remains strong with net assets of £592.3m (based on historic cost of properties) compared with £592.0m in the previous year. We acquired two new care homes during the year on a turnkey freehold basis for a total consideration of £46.9m and invested £74.5m in the construction of new housing properties in a mixture of social and affordable rented and shared ownership tenures. Net debt excluding finance lease obligations was £562.8m at 31 March 2024 (2023: £514.4m), the increase reflecting payments to acquire the two new care homes and ongoing investment in the development programme. We had undrawn committed loan facilities of £144.6m at the same date (2023: £185.6m). Housing occupancy remained strong throughout the year, ending the year at 98.7% consistent with the previous year (2023: 98.7%). Care home occupancy improved by 2.6% to 88.1% (2023: 85.5%, restated to include all Halcyon care homes). Our mature care homes have been operating in line with or ahead of average sector occupancy all year. Impact of the external environment During 2023, the Bank of England base rate continued to increase, peaking at 5.25%, a level at which it has been held since August 2023. Financial markets remained broadly stable and constructive, but the volume of financing issued by the housing sector has been materially lower than in previous years mainly due to the higher cost of funding. In December 2023, Anchor borrowed £25m at competitive rates using two bilateral private placements. The fixed interest rates payable were lower than on drawings from our floating rate revolving credit facility, mitigating some of the cost of increasing rates through the year. However, as 10% (2023: 5%) of our loan book is neither fixed nor hedged and held at variable rates of interest, rising market rates have contributed £2.1m of the increase in interest payable. In turn this has contributed to a reduction in our interest cover ratio which finished the year at 155.3% on an EBITDA MRI, banking covenant basis (2023: 180.2%). We have forward purchased most of our gas and electricity throughout the year, buying at beneficial rates that were significantly lower than budgeted, ensuring that we fulfilled our commitment that no resident purchasing their energy via Anchor will pay more than the equivalent of the government’s Energy Price Guarantee as at October 2022.
12 Anchor Hanover Group Annual Report & Financial Statements 2024 Amortisation, Major Repairs Included), a key liquidity indicator, was £54.4m compared with £46.7m generated in the previous year. fees. Operating surplus was £36.7m (2023: £37.5m) representing an operating margin of 5.8% (2023: 6.8%), with our performance adversely affected by a one-off impairment charge at one of our development schemes. EBITDA MRI (Earnings Before Interest, Tax, Depreciation, HIGHLIGHTS • Housing occupancy remains high at 98.7% with continued lower-than-sector arrears levels of 2.6%. • Care home portfolio is 121 homes following the acquisition of two brand new turnkey homes and the transfer of four care homes through a mutually agreed lease exit and one freehold sale. • £76.3m (2023: £76.0m) invested in improvements to existing properties. • 573 (2023: 82) new units reaching practical completion during the year. • £8.3m of direct and indirect financial support provided to residents to help alleviate the impacts of the cost-of-living crisis. • Successful forward purchasing of gas and electricity resulting in lower costs for residents. • High levels of liquidity maintained with £144.6m (2023: £185.6m) in undrawn loan facilities to fund Business Plan growth. • Gearing remains very low at 28.9% (2023: 28.5%). • Interest cover including capitalised repairs (EBITDA MRI) 155.3% (2023: 180.2%). Along with organisations and households across the country, we have continued to feel the pressure from persistently high inflation, interest rates that have been maintained at their highest level for 16 years and soaring energy bills. The prolonged cost-of-living crisis has continued to impact the lives of residents, colleagues and their wider communities and as a business we are still feeling the long-term effects of the UK’s exit from the European Union, most keenly in our labour supply chains. In this context, the consistency of our corporate strategy and our financial strength and resilience has continued to serve us well. Total revenue for the year ended 31 March 2024, was £628.7m, an increase of 13.2% (£73.2m) on the previous year. The increase in turnover includes £33.6m from a full year of operating the Halcyon care homes acquired in November 2022 compared with £11.9m from five months in the previous year, along with higher service charges reflecting the higher cost of utilities and increases in regulated social housing rents and care home
history of damp and mould at the property, displayed a lack of empathy, and did not consider the resident’s vulnerabilities. We also failed to monitor the remedial work that we said would resolve the issues. We are very sorry that our resident experienced damp and mould in their property over an unacceptably long period. Despite several attempts to rectify the problem, it took us far too long to identify the cause of the damp and we acknowledge the distress this will have caused. We have personally apologised, paid compensation, and have followed the actions and recommendations made in the Housing Ombudsman review, completing the work. We have also ensured our internal processes are as robust as possible and implemented new procedures. We have taken a risk-based approach to reviewing our portfolio for the risk of RAAC (reinforced autoclaved aerated concrete), considering the age and construction of our properties and driving a programme of review and site inspections at 379 of our locations. We have concluded that there are 49 properties where additional investigation is required to fully rule out the presence of RAAC, but believe the risk to be low. Financial performance In spite of the wider economic challenges, we delivered a strong performance for the year. Occupancy levels in housing at 98.7% were consistent with the previous year and were just 0.2% below pre-pandemic levels of 98.9%, and demand for our services remained strong as evidenced by our waiting lists. Housing arrears were £8.8m reflecting 2.6% of housing turnover, £1.7m higher than the prior year (£7.1m and 2.3% of housing turnover respectively). Our customer base is largely above pension age and as such we continue to have limited adverse exposure to the employment market and Universal Credit system. We have seen a 6% increase in the proportion of arrears which are over 180 days old from 31% to 37% which we believe is attributable to the cost-of-living crisis. Occupancy recovery remained a focal point for our care homes, and we achieved a 2.6% growth from 85.5% 2 Strategic Report including Operating and Financial Review
The care sector has experienced labour market shortages for several years, and according to the Skills for Care’s report ‘The State of the Adult Social Care Sector and Workforce in England – October 2023’, care workers had a turnover rate of 32.9%, which equates to an estimated 54,000 leavers in the sector over 12 months. At Anchor we have focused on our recruitment of overseas colleagues who already reside in the UK, but who require a certificate of sponsorship to work. This has proven successful with almost 400 colleagues joining our workforce, driving down our vacant hours from 30,000 to 19,000 hours with an overall reduction in our colleague turnover from 31.9% last year to 29.7% at March 2024. Vacant hours are otherwise filled by the much costlier use of agency staff. Materials and labour shortages also impacted our development activities, with three developments comprising 197 units which had been expected to open during the year, now expected to open in the next financial year. The introduction of the Building Safety Act 2022 places new requirements on landlords in relation to the design, construction and management of high-quality homes. Aimed at enhancing residential safety and standards, the Act mandates comprehensive safety assessments, rigorous construction protocols, and continuous maintenance obligations. Landlords must now ensure that buildings adhere to updated safety regulations and implement robust management practices to prevent hazards. This legislative shift emphasises accountability, promoting safer living environments and greater protection for people in their homes, in the residential sector. The Act introduced new regulations relating to buildings of seven storeys or 18 metres and over. Our seven high rise properties as defined by this Act have all been registered and approved by the Buildings Safety Regulator. We are working with independent consultants to establish the nature and extent of any remediation works required to external wall systems once site surveys are complete at six buildings which have been assessed as high risk. In the meantime, appropriate fire safety mitigations are in place at all affected locations. To ensure we effectively manage damp and mould, we follow the guiding principles laid out within the operating guidance of the Housing Act 2004, Section 9, inspection and assessment of hazards given in HHSRS (housing health and safety rating system). This allows categorisation of damp, mould and condensation hazards as category 1 and category 2. We assess damp, mould and condensation hazards through a risk-based methodology to determine a risk rating. This is achieved firstly by identifying the issue and cause of the defect, then capturing the severity of the hazard and the impact it has on both the resident and the home. During the year, the Housing Ombudsman made a ruling of severe maladministration against Anchor. The case related to our handling of reports of damp and mould, and complaint handling, in relation to a resident in a rented home. We recognise that recordkeeping and management was lacking, we did not consider the
(restated to include all Halcyon care homes) to 88.1%. Our newly opened care homes, Skelton Court in Skelton-in- Cleveland and Marsh Farm Manor in Royal Wootton Bassett have occupancy levels in line with plans, and The Mill House in Skipton is ahead of target with occupancy of 72% just nine months after opening. We continually review our care home portfolio to assure ourselves that we are best placed to deliver services in each location and during the year we handed five care homes over to other providers. Care home arrears on a like-for-like basis, including the Halcyon care homes, were £8.9m at the end of the year compared with £7.9m for the prior year. The £1.0m increase was attributable to increases in fee rates and occupancy compared with the prior year. The level of debts over 90 days increased by £0.3m indicating that some residents are taking slightly longer to pay. As a percentage of fee income, the debt levels for 2024 and 2023 were consistent at 3.1% for both years.
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bathrooms representing 23% of the overall planned works investment (2023: 743 kitchens and 786 bathrooms). As part of the Anchor-wide change programme, we have begun to transform the way we deliver repairs and planned investment. From spring 2025, we will launch a new technology platform that supports a more efficient end-to-end process for residents, colleagues and suppliers. Following extensive resident engagement and consultation, we will also go live with new contractor appointments for the delivery of repairs and planned investment works across our eight geographical regions. Our investment plans are informed by making best use of intelligence from stock condition surveys, strategic portfolio reviews, our ‘Don’t walk by’ surveys and other onsite engagement with colleagues, residents and contractors, helping us to ensure we deliver value for money services. We have undertaken an accelerated programme to update our stock condition data. As at 31 March 2024, more than 80% of our stock condition data was less than two years old. This physical asset data enables us to plan investment in our property portfolio with more certainty compared with our historic lifecycle approach. As such our approach to preparing the Asset Investment Plan for future years is changing, enabling us to more confidently prioritise our property investment. Our Environmental Sustainability and Net Zero Carbon Strategy has been refreshed and sets out our climate commitments to ensure all our properties are at Energy Performance Certificate (EPC) level C or above and that we will be net zero ready in our business operations by 2030, with a further commitment to reach net zero across all carbon scopes, including our supply chain, by 2050.
Despite the lower property sales during the year, turnover and contribution from new developments that were open or opened during the year were in line with expectations for both price and volume. Delays in construction completions influenced largely by the prevailing economic conditions meant that some sales expected in the year did not materialise and are now expected in 2025. During the year we undertook a review of the activities of our development subsidiary, Anchor Lifestyle Developments Limited (ALDL), whose principal purpose is to develop retirement properties for sale. Delays to sales stemming from a number of factors, including development delays during and post-COVID and historic contractor and subcontractor failures, have increased the intragroup interest accruing on ALDL’s stock balances at a time of high prevailing interest rates. We have therefore taken a number of steps to stabilise the financial position of ALDL. Alongside the intragroup sale and tenure conversion of Atlas Lodge, Anchor (the Parent, the Association) entered into a partial debt for equity swap with ALDL. ALDL issued two shares to the Parent for a consideration of £31.7m which was subsequently offset against the intragroup loan, reducing the outstanding balance and mitigating future interest charges. The Parent’s aggregate investment in ALDL has been impaired by £15.5m and this write down has been reported as a financing charge within interest payable in the Association. Our programme of investment in existing properties delivered 715 planned works jobs totalling £29.4m (2023: 940 planned works jobs totalling £39.2m), the majority (80%) of which were capital in nature, including 552 kitchens and 507
A summary of Anchor’s financial results over the past five years from all its activities is set out below:
YEAR ENDING 31 MARCH
2024 Total £m
2023 Total £m
2022 Total £m
2021 Total £m
2020 Total £m
628.7
555.5
526.2
528.2
522.2
Turnover
Operating surplus before exceptional costs and goodwill amortisation Operating margin before exceptional costs and goodwill amortisation Exceptional costs 1 Goodwill amortisation Operating surplus Surplus / (deficit) for the year Capitalised Major Repairs
45.2
41.0
53.8
47.9
59.3
7.2%
7.4%
10.2%
9.1%
11.3%
–
–
(1.8)
(1.6)
– –
(8.5) 36.7 (45.5) 54.4 1.1
(3.5) 37.5 12.2 (47.1) 46.7
–
–
52.0 24.4
46.3
59.3 34.1
(12.0) 2 (36.4)
(37.2) 64.8
(57.1)
EBITDA MRI 3 43.9 1 Exceptional costs in 2021 and 2022 relate to costs associated with the group restructure and refinancing which spanned two financial years and is now complete. ²After £40.3m break costs. ³EBITDA MRI is calculated as operating surplus before depreciation, impairment of housing properties, amortisation of goodwill and amortisation of government grants, and deducting capitalised works to existing housing properties. 56.2
14 Anchor Hanover Group Annual Report & Financial Statements 2024
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