Hampshire County Council

Buildings, Land and Procurement Panel Item 12

Business Services Group - Report and Accounts 2003/04

16 July 2004

Report by the Director of Property, Business and Regulatory Services

How the conclusion in this report fits with the Corporate Strategy

This scheme will impact on the delivery of the following Corporate Aims

Aim 3 - achieving economic prosperity - by developing the business units and

responding to market and competitive pressures

Aim 5 - improving services - by continuing to develop and invest in the Business

units and react to customer needs

1

Introduction

1.1

The main purpose of this report is to provide the Panel with a broad summary of the financial performance of the self-funding business units within the Property, Business and Regulatory Services Department during 2003/04 The businesses are:

· Hampshire County Council Catering Services (HC3S)

· Hampshire Transport Management (HTM)

· Hampshire Cleaning Services (HCS)

· Hampshire Printing Services (HPS)

· County Supplies (CS)

2.

Financial Performance

2.1

The accounts for each business are shown in Appendix 1 together with a summary for the whole of the Business Services Group. Total income was £31.92 million in 2002/03 and this increased to £33.34 million in 2003/04. On this turnover, the businesses recorded a total trading surplus of £497,000 or 1.5%. This compares very favourably with a planned surplus (December 2003) of £432,000 and an original forecast (December 2002) of £283,000. This represents another successful year for the group as a whole and the financial position of the PBRS business units continues to be very sound.

2.2

Three of the businesses performed better than the forecasts included in the current business plans, while HC3S and Cleaning Services were slightly below expectations. The most significant improvement was recorded by County Supplies where net income from stores issues was higher than expected in the closing months of the financial year. The results of the individual businesses are shown in detail in Appendix 1 and are also summarised below:

2.3

The impact of these results on the accumulated surpluses of the PBRS businesses is shown below:

Accumulated Surpluses (£000's)

Surplus at 31/3/03

1,028

Trading surpluses 2002/04

497

Depreciation & interest

192

Spending from surpluses

Closing balance at 31/3/03

(184)

1,534

2.4

The accumulated surpluses of the businesses provide a strategic reserve that will protect the County Council from financial risk in the event of unforeseen adverse trading conditions and make it possible for the businesses to invest in developing business and service improvement. The current business plans identify the potential for substantial expenditure from surpluses (£659,000) in 2004/05. As always these plans will be revisited and revised during the course of the year. Actual commitments will also be heavily influenced by the level of success enjoyed by HC3S when tendering for further secondary school business in the north-east of the County.

2.5

The level of expenditure from the accumulated surpluses in 2003/04 was lower than previously reported (£184,000 against an earlier projection of £307,000) and part of this expenditure will be carried forward into 2004/05. The combination of this lower spending together with the very positive trading results means that the closing balance on the accumulated surplus is nearly £200,000 higher than forecast at £1.53 million. A new five year lease on County Supplies' main warehouse building has recently been concluded with the intention that options to move out of the leasehold accommodation will be explored over the next two to three years. Any project of this nature would require a substantial contribution from the surpluses of the business units.

2.6

As was previously forecast, the school catering budgets that are managed through Service Level Agreements by HC3S were underspent by £23,000 in 2003/04. Arrangements have been made with the County Treasurer for a new balance of some £191,000 to be carried forward in a separate account for the benefit of the school meals service. In line with the principles set out in the Service Level Agreements, a programme is being developed to reduce the number of schools at which transported meals are served and funding will be drawn from this source.

2.7

These accounts exclude the Hampshire Works residual account, which showed a surplus of £16,000 for 2003/04.

2.8

The trends in these accounts provide grounds for confidence that the trading surplus of £264,000 expected in 2004/05 will be achieved and that the group will maintain a substantial aggregate surplus.

3.

Business Performance and Issues

3.1

Business issues and the recent achievements of the businesses were reviewed by the Panel earlier this year and only the most significant items are described below.

Catering Services (HC3S)

3.2

Good progress has been previously reported on the implementation of several initiatives that are described in the business plan. The key items are:

· growth in meal uptake and success in the market for secondary school

single site agreements - the number of single site contracts with Hampshire schools increased by two to nineteen in September 2003 and it is expected that a further gain of 3-5 sites will be achieved this year. HC3S also stepped in to maintain the service at a number of sites across the county (including the Sir Harold Hillier Gardens and Arboretum and the Milestones Museum) when the private sector provider, Edwards Catering Southern Limited, ran into financial difficulty and was unable to continue trading.

· `flagship' sites - work has now been undertaken at all seven sites at a total cost of £87,000. This includes £30,000 on `cashless' payment systems at four schools. Early evidence suggests that there has been a significant increase in the take-up of meals at these sites and, if this is sustained, the business will need to work with schools to increase the number of sites covered by these initiatives

· menu development - menus are regularly updated and HC3S

continues to support the Healthy Schools initiative. The sourcing of

less processed and additive free items has become an important

focus of this work

· `rewards' scheme - a method of encouraging schools to support

increased uptake by pupils has been introduced and over 100,000

reward points have been earned. These can be exchanged for

activities and equipment that will be funded by HC3S, for example

a County Wardrobe topic box, a class visit to a Hampshire farm or a

new set of goalposts. The value of the points issued so far is around

£38,000.

The main outstanding issue for the business is the Pay and Benefits Review. It will be essential that the outcome of the corporate review is managed sensitively. The current financial year features a reduced number of trading days and the trading surplus for HC3S is expected to be low. The current projection is £16,000.

Hampshire Transport Management (HTM)

3.3

HTM has successfully maintained a very healthy trading position and continues to work with the Environment Department on sustainability issues. During the last financial year, HTM upgraded the fuel management system at its storage locations and is now seeking to modernise the fuel tanks themselves. Other investment will be made in the workshop facilities and the main vehicle management/records system will be replaced. HTM has also run successful promotions to increase awareness and use of its short term Hire Desk.

PBRS Cleaning Services

3.4

This business is now solely concerned with the headquarters offices in Winchester and the plan to deliver a significant proportion of the work through staff who are dedicated to individual buildings and who work longer hours across the normal day has been implemented. In line with the strategy previously agreed with members, this resulted in a 75% reduction in the turnover of this business to £482,000. Cleaning Services is expected to move to a break-even position in 2004/05.

Hampshire Printing Services

3.5

Income to HPS was nearly 5% down on the previous financial year at £2.27 million. This is believed to stem from `natural' fluctuations in printing requirements and partly from the disruption associated with the relocation to Winnall in the first quarter of the year. Facilities at the new building are excellent and there has been a 10% reduction in the value of work sub-contracted out to third party printers.

County Supplies and Corporate Procurement

3.6

The total value of the contracts managed by County Supplies has increased to £76 million. A breakdown of this total is shown in Appendix Two. Some £23 million of this total is included in joint purchasing arrangements with other member authorities of the Central Buying Consortium (CBC). The most significant new contract over the last year is the new agency staff contract with Manpower plc. The final negotiations with the company took longer than anticipated and the initial launch was delayed until May. Presentations to around 150 staff across the County Council have been completed and around 30 orders for administration and clerical staff have been received by Manpower. The bulk of the Council's requirements arise within Social Services and these units will begin to place orders for care staff with Manpower with effect from the beginning of July.

3.7

Inflationary pressure on office and educational supplies was again very weak during 2003/04 and this can be seen in the table below:

3.8

Support for the rollout of SAP to departments and schools was a major commitment during 2003/04 and County Supplies has also continued to be very active on the corporate procurement agenda. A detailed progress report was made to members at the meeting of the Buildings, Land and Procurement Panel in May. The establishment of the South East Centre of Procurement Excellence and collaboration across the public sector will be important issues over the next 12 months.

3.9

County Supplies also undertook detailed research into customer perceptions and attitudes during December 2003 and January 2004. Miller Associates conducted interviews (mainly by telephone) with over 180 schools and colleges in order to develop a detailed analysis of strengths and weaknesses. The report summary stated that "County Supplies is held in high regard, has retained a good deal of customer loyalty and has many positive values associated with it". The report was particularly complimentary about the service provided to customers who made contact with Supplies staff for advice about products or to deal with queries.

4

Summary

4.1

The businesses achieved a very positive financial performance during 2003/04 with an overall surplus of £497,000 and have established a healthy accumulated surplus of £1.53 million. This surplus provides an opportunity for the businesses to undertake further investment and will protect the County Council from financial risk.

4.2

The businesses have made good progress on implementation of their business plans during 2003/04 and there is a substantial body of improvement initiatives that will be carried forward into 2004/05.

Recommendation(s)

That the Buildings, Land and Contracts Panel advise the Executive Member for Policy and Resources that:

1

The 2003/4 report and final accounts for the Business Services Group be approved.

£000s

Plan

Actual

Difference

Total Income

32,519

33,336

817

Total Direct Costs

27,057

27,874

817

Contribution

5,463

5,462

0

Overheads

5,032

4,965

(65)

Surplus/(Deficit)

432

497

(65)

2003/04 Final Accounts

Target

Actual

Difference

Income

£'000

£'000

£'000

HCC Primaries

10,417

10,573

156

HCC Secondaries

2,111

2,190

79

West Berkshire

786

885

  99

Non-Education

1,023

1,278

255

Total Income

14,337

14,925

588

Direct Costs

Staff

7,761

7,904

143

Provisions

4,269

4,527

258

Other

747

1,040

292

Payback to customers

96

82

-14

Total Direct Costs

12,873

13,552

679

Contribution from main activities

1,464

1,373

-91

Contribution from other activities

0

Total Contribution

1,464

1,373

-91

Overheads

1,293

1,239

-54

Surplus/(Deficit)

171

134

-37

2003/04 Final Accounts

Target

Actual

Difference

Income

£'000

£'000

£'000

Contract Hire

3,177

3,226

49

Spot Hire

290

314

24

Courier Service

332

341

9

Fuel

991

1,065

75

Contract Maintenance (Workshops)

765

829

64

Other Maintenance (Workshops)

679

704

25

Total Income

6,233

6,479

246

Direct Costs

Contract Hire

2,690

2,834

144

Spot Hire

273

299

26

Courier Service

371

374

3

Fuel

1,003

1,089

86

Workshops

851

847

-4

Total Direct Costs

5,188

5,443

255

Contribution

1,045

1,036

-9

Overheads

908

891

-16

Surplus/(Deficit)

138

145

7

2003/04 Final Accounts

Target

Actual

Difference

Income

£'000

£'000

£'000

All sites

469

482

13

Total Income

469

482

13

Direct Costs

Staff

335

323

-12

Supplies

11

7

-4

Total Direct Costs

346

330

-16

Contribution

123

152

29

Overheads

156

189

33

Surplus/(Deficit)

-33

-37

-4

2003/04 Final Accounts

Target

Actual

Difference

Income

£'000

£'000

£'000

Main Printworks

2,091

1,876

-215

Internal Print Room

320

329

9

Variable Data Printing

67

69

2

Total Income

2,478

2,274

-204

Direct Costs

Paper

284

286

2

Outwork

717

592

-125

Repro materials

76

73

-3

Photocopiers

188

177

-11

Total Direct Costs

1,265

1,129

-136

Contribution

1,214

1,145

-68

Overheads

1,176

1,087

-89

Surplus/(Deficit)

38

59

21

2003/04 Final Accounts

Target

Actual

Difference

Income

£'000

£'000

£'000

Stores turnover

7,369

7,512

144

Retrospective rebates

1,171

1,183

12

Other

462

480

19

Total Income

9,002

9,176

174

Direct Costs

Staffing

1,243

1,254

11

Transport

180

179

-1

Supplies & Services

5,963

5,987

25

Total Direct Costs

7,385

7,420

35

Contribution

1,617

1,756

139

Overheads

1,499

1,559

61

Surplus/(Deficit)

118

197

78