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Richard Page, Director of Finance

<p>Richard Page AMM 2011</p>

Good afternoon. I’m Richard Page and for the next few minutes I’m still the Finance Director. I’m going to give a brief report on the financial performance and position over the year 2010-11 and to highlight the significant figures. The detail is available in the Annual Report and it’s also on the website. Now I must emphasise that finance is not an end in itself so far as we’re concerned. The aim is to facilitate and support the clinical services and all of the figures must be looked at in this context. When I joined the NHS several years ago from the manufacturing sector, I was amazed that money was so central to the NHS and to the public sector. I couldn’t make that out having come from what was technically the money making industries. And I made it my objective to make money and finance less important and yesterday at the performance committee the chairman noted how good it was that finance was so well down the agenda and that it didn’t take up too much time – success. I felt like I had made it, even on the day before I retire I got there. Now we also hear a lot about commercialism in the NHS, about competition and things like that and people are quite worried about that. Now I came from the commercial sector and in a sense that’s fine by me, but we need to define what that means because commercial in itself doesn’t mean making money and getting profits. If you define what commercial outcomes should be they are to maximise the shareholder value. Define your shareholder and you soon work out who’s supposed to be the beneficiary of what we do. I define the shareholder as those who benefit from our services. It’s simply the patients and the users and they should be the ones who get the maximum benefit from what we’re doing. So we’re not interested in making money but also our users and our patients are not served if we have financial problems. You only need to look around at some of the services in the NHS to see the chaos that that causes. So we’re here to ensure there is efficient and effective use of resources, ensure there is a buffer against unforeseen occurrences so we are not derailed by adverse events, we’re here to ensure a cushion for flexibility and changes and there is a lot of those about, we’re here to provide a source of investment and also reserve to take advantage of any opportunities that come along. So let’s see how we’ve been doing.

This is the statement of comprehensive income and it shows the income and expenditure for the year and a comparison to the previous year. Now we made a small surplus and it was slightly better than the previous year despite all the difficulties we’ve had with the income and the savings we’ve had to make. You’ll notice that the previous year said that it’s restated. That’s a technical point that’s all to do with Bexley joining us and we have to do something that is called merger accounting. Terribly esoteric stuff but what it means is that although Bexley joined us during the year of 10-11 we actually have to add it back as though it was here for 09-10 so we can get a proper comparator set of figures.

And here you can see there has been virtually no increase in income between the two years when we look at that comparison and that in fact if you take inflation into account there was actually a reduction in income but because we managed to achieve the efficiency savings which so many of you out there the staff have been involved in did superb job and we did make an operating surplus and that was slightly increased. Now some of our, ah, below that operating surplus we have some other financing items of income and costs as interest on the cash balances that we earn that interest and we also pay interest and that’s, most of that is for our private finance initiative investment which by the way don’t believe everyone who says PFIs were bad, ours is a good one. And also we pay a dividend to the Department of Health.  Statement of financial position which used to be called the balance sheet. That shows the financial strength at the end of the year. This indicates our ability to achieve the aims I mentioned before of managing problems, being flexible, of resources for investment and take opportunities. It shows that the net current assets have shown quite a good increase and a very strong, particularly the cash position and our income and expenditure reserve has also improved and that’s because the surplus we’ve made on the statement of comprehensive income. These are the two main indicators of our strength provided everything else on the statement of financial position is in good condition the you are looking at the cash position and the I&E reserve shows our strength. Now in previous the cash position has been strong but the I&E reserve was not good enough, was not up to what we thought was a reasonable level of reserves. It’s now getting there, we’re not quite at the level that the board thinks is sustainable and will give us real strength but we’re getting pretty close to that.

Now you’ve heard from Stephen and Ify about the progress and changes that have occurred during the year and the finance has been there to enable this to happen. Now we’ve also been able to invest 1.8 million in capital expenditure and nearly all of this went on the upgrading of the medium secure unit, that’s the Bracton Centre, and a range of smaller spends on capital maintenance that keep our estate in good order.

This is the cash flow which shows the sources of our cash and also where it was applied. It shows that we have sources from the operations and then of course depreciation because that doesn’t cost as cash that adds to it. And then it also shows that the way in which we manage the balance sheet has made sure that we’re generating cash rather than using it and then we’ve been using the cash on capital expenditure and also that dividend.

Next slide just shows a couple of things we need to look at, which is our prudential borrowing limit. This shows the amount that we could easily borrow without getting into any problems and the net amount of that is the 43 that we can borrow and we’ve actually borrowed £10 million, sorry £8 million, so we’ve got 35, nearly £36 million, that if the need arises is available and that along with our cash balance has put us in a very good position if there are investment opportunities.

The slide also shows that we’re very good at paying our bills on time which we are very proud of that we keep our creditors, our supplies, paid on time.

Now Stephen’s already talked about Monitor who is our regulator. They require us, or at least they risk assess us on various measures and you can see that there are a range of indicators here that we’re measured on EBITDA, that’s earnings before interest, taxation depreciation and amortisation. That’s sort of like a gross margin with a slight technical difference. And also on whether we achieved the EBITDA margin we planned to do. That checks whether in fact we achieved our plan. The return on assets and the I&E surplus is a measure of our financial efficiency and our liquid ratio indicates the cash and liquid resources that are available to keep us in business. Now five is the very best rating and one is the lowest. If you get down there you’re in big trouble. Three and above is good and overall we achieved four which puts us in a good, nice big tick in the box and far as Monitor are concerned we’re in a good position. Now, we generally feel that three is good enough and if we do get a little bit further into our reserves then we’ll be in a very strong position and probably we’ll be able to plan to be in a three position in the future.

We’re going to end by looking a little bit at the future. We don’t need to be reminded about the national economic position. It’s in our face from the newspapers and radios, etc every day. And the Government policy is to cut back on public expenditure and this will affect health. Now even in times of NHS expanding spend, we in our sector didn’t do particularly well. So every year has always seemed more difficult than the previous one and as we look over the edge into the future we must remember that we’ve almost constantly been in this situation and Oxleas has been very good at learning how to manage and plan scarce resources, use scarce resources well and still take services forward

The future is one, as Stephen has said, where we will be contending for services as they are increasingly going out for tender. There will be negative income, we’ll have income reductions on the whole, there will be increased efficiencies required, we’ll need to invest in the properties related to the community services. I’m doing my good job as the purveyor of doom as directors of finance normally are. And there will be investments needed in IT innovation.

There are also great opportunities, particularly in our area when we look at what’s happening at Queen Mary’s site in conjunction with our partners and others stakeholders in the health services. There’s tremendous work to be done there and we hope we’ll be able to use our resources and strengths to help that. Now Oxleas’ strong position means that it’s in a good position to fund all the resources that are needed to achieve the changes and to improve services.

Now I’ve been in Oxleas for getting on for 19 years and it started from a small and not very successful position.  We were expected not to survive. But every year there’s been improvements in every aspect of the service and the environment and it’s been achieved against the background of scarce resources. We’re now in a very strong position financially to face a very uncertain future. Now as the Chairman mentioned, today is my last day at Oxleas. When I walk off this stage I’ll have retired. Thank you (laughs), that’s a cheer for getting rid of me. Here’s not many people can say they’ve retired on stage at the O2 and I can assure you there will be no comeback concerts. If you’ve heard my singing you wouldn’t have liked the first one. But I just want to say it’s been an honour and a pleasure to work with you and to work for you. It’s been the people I have worked with and those I’ve worked for that have made this job pleasant and satisfying.

I will say that working in the NHS, in lots of ways, the day job 9-5 is about the worst job I’ve ever had. There’s the frustrations and the bureaucracy, fortunately imposed on us not internally imposed, which make life very slow and very difficult. But the difficulties have been vastly outweighed by the personal working r/ships and the outcomes for those of you who use the services and that’s why I’ve stayed so long. I’ve had 12 other jobs before I came here and I’ve stuck around here, because it’s so good place to work. To my own staff, we’re going to have staff awards and they actually need and award for putting up with me for all this time, and thank you all for making my life so easy. My staff have made life here a lot easier than my colleagues have had.

For the team of directors working together for one purpose has been really exciting. Having a superb chair and a very supportive set of non execs who have done their job really well. They’re supportive but they’re also doing what they should do which is challenging and bringing new insights. And for the friendship of our users, thank you very much indeed.

From the bottom of my heart I say thank you all very much for your support and dedication and god bless you all. I trust that I leave this place a little better than when I first came, I first arrived. And I’m confident for your future that it’s in good hands. I particularly want to mention my successor Ben, he’s out there somewhere. He’s a good bloke; look after him as you’ve looked after me and then he’ll enjoy his time here too. Thank you very much, god bless you all.