Agenda item

COUNCIL COMPANY AEQUUS (ADL & ACL) ANNUAL ACCOUNTS 2021/22

Minutes:

The Section 151 Officer introduced the report and explained that the Corporate Audit Committee should note the accounts.  The key points were that the accounts were profitable and there had been a release of dividends back to the Council.  As regards company changes, this had been to full Council to revise the structure.

 

Tim Richens (Managing Director, Aequus Group) confirmed there were two sets of accounts for ADL the asset holding company and ACL the primary generator of financial returns to the Shareholder (B&NES Council).  He explained that ACL delivers delivered new market and affordable housing.  There were profits of £468,000 and sales including Riverside View (remainder of the 95 new apartments) and St Joseph’s Court (2 houses this year, the rest next year).  In summary they had achieved targets commercially, repaid loans and they were paying dividends.  The sale of 117 Newbridge Hill following conversion into 7 affordable home and working with South Gloucestershire for the start on site of 30 low energy homes at Manor Gardens, Frenchay are progressing in 2022.

 

During questions the following issues were raised:

 

·  The required profit on developments was normally 20%, with a commercial return on interest at 4% over the EU reference rate and a dividend paid to the Shareholder (B&NES) of £1m/year.

·  That £1m would support B&NES Council Services and there would be a capital receipt to the Council for any land transferred to ACL.

·  £81k was the margin on the interest charged to ADL by the Council for loan funding, £6m was the outstanding loan balance secured against the assets which was repaid over 50 years like a mortgage.  For each property sold there was an independent valuation.  The total value of properties held by ADL is £8.1m.

·  With this being the first occasion the accounts had come before the Committee it was noted that the administration costs had increased.  The reason for this was staff had increased from 4-5 to 11 and the costs had grown.  The external auditor is required for each company’s accounts and this cost had been subject to a recent tender exercise.  The complexity of the accounts does result in a higher cost.

·  The pension liability for the employer contribution in relation to those employees within the money purchase scheme equates to 6% of salary.

·  The 52 private rentals were handled by Gregory’s (as agent) with one apartment currently rented by the Council for temporary accommodation.

·  The objective of ACL was to deliver new, low energy homes and this is the main generator of profits for the company and returns to the Shareholder (B&NES).  It was positive that BANES and South Glos had a possible pipeline of 500 units in two more schemes.

·  The core capability for the group was to deliver the Shareholder approved business plan.  They could buy in a project management capacity and already work with large national construction companies to deliver the schemes. 

·  There was a baseline profit requirement of 20% but, with the current situation with house prices, increasing interest rates and increased construction costs, the balancing item will be future land values.

·  Generally, in the market there is typically a 25% profit rate and some developers achieving up to 33% historically.  The reason for 20% baseline for ACL was the focus on delivering low energy homes in the long term to satisfy the corporate objectives of BANES and South Glos, to address the climate emergency and the need for policy compliant levels of affordable housing.

 

RESOLVED that Corporate Audit Committee note, on behalf of the Council, the audited accounts of ADL and ACL (Council wholly owned companies), in line with the Committee’s Terms of Reference.

Supporting documents: