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14
Sept
'No reason' to close loss-making council owned housing company, review finds
A review of a North Yorkshire Council's loss-making housing company has found there is “no reason” to close the firm.
Brierley Homes, which was founded in 2017, is part of the Brierley Group of 12 companies owned by the council.
The firm reported a £3.2 million loss for the last financial year and has faced issues over cashflow and payment to suppliers.
It also has a £25 million loan facility provided by the authority to help with payments — which is expected to rise to £27 million next week under council proposals to help increase the financial headroom of the firm.
Council officials commissioned an independent external review of the company’s operating model, structure, financial position and resilience.
The review came amid criticism from opposition councillors that the firm was reliant on large sums of money from the authority.
Tony Dodds, a real estate expert who runs Northumberland-based Tony Dodds Consulting, carried out the review, which is due to be put before senior councillors at an executive meeting on September 16.
Brierley Homes' Laverton Oaks development in Kirkby Malzeard. Picture: Brierley Homes.
In his findings, Mr Dodds said Brierley Homes is business which is based on a “sound operating model” and has “an achievable goal” to build new homes for profit.
He added that the company had endured a difficult trading period and “poor project management”.
Mr Dodds said:
It has endured a difficult initial trading period with global impacts, disappointing contractor performance and some poor project management leading to cost overruns, project delays and an erosion of profits. It now faces high debt levels, delays in crystalising Shareholder Value and criticisms for its unpredictable performance.
Despite this the company is delivering high quality projects with a pipeline and forecast to deliver Shareholder Value over the medium term. Structures and systems are being improved, and more certainty is being provided over delivery programmes and costs.
Mr Dodds said the new homes market in North Yorkshire has a “positive outlook”, but “remains affected by macro-economic influences”.
He added that “proper project planning assessment” were vital to ensure the company avoided unnecessary costs and delays.
Meanwhile, Mr Dodds said the company has a “positive impact” on the county and there was “no reason” to cease trading the firm or change its operating model.
He said:
The brief for this report asks if the operational model for BH is still appropriate or are there better alternatives. In answer, there is no reason to cease the trading of BH or change its current operating model, nor are there any other models that better satisfy achieving the goals of the shareholder.
The company has a positive impact on the county in addition to its core aim of generating Shareholder Value. These benefits are varied and tangible and BH can continue to provide a valuable contribution to the economy and environment of the area.
Mr Dodds made a range of recommendations, which included review of the company’s loan terms, use of private sector funding structure and a change of the firm’s project appraisals.
The review comes as the council looks set to provide an additional loan facility to Brierley Homes of £2 million.
The move would be in addition to the £25 million loan facility already available to Brierley Homes — of which the firm has already used £24.5 million.
Under the terms of the original loan, the money was due to be paid back this year, although last year council bosses agreed to extend the deadline until 2028.
The new loan would be £2 million and be subject to a market rate of interest of 6% above base rate. However, any amount drawn down on the facility would have to be approved by Gary Fielding, corporate director for resources, in consultation with the council leader, deputy leader and chief executive of the council.
In a report, Vicki Dixon, assistant director of resources and environment as the council, said the purposes of the increased loan facility, which will take the company’s overall commercial borrowing from the council to £27 million, was required to help it “continue to make all payments due to suppliers in the event of some delayed sales”.
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