Decision

Current regulatory judgement: Flagship Housing Group Limited (5 July 2023)

Updated 5 July 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Flagship Housing Group Limited
• Regulatory code: 4651
• Publication date: 5 July 2023
• Governance grade: G2
• Viability grade: V2
• Reason for publication: Governance downgrade and changed basis for viability grade
• Regulatory route: In Depth Assessment

Regulatory judgement

This regulatory judgement downgrades Flagship Housing Group Limited’s governance from G1 to G2 and confirms its existing V2 grade for financial viability.

Flagship Housing Group Limited (Flagship) continues to meet the requirements for governance set out in the Governance and Financial Viability Standard. However, following an In Depth Assessment (IDA) we have concluded that Flagship needs to improve the effectiveness of its risk management and internal controls assurance framework and aspects of its financial governance arrangements.

Board oversight of business and financial planning, including stress testing, requires improvement. Flagship needs to ensure clarity and transparency in its reporting to board, particularly in respect of financial performance and funders’ covenants. Flagship’s board needs to strengthen its oversight and assurance to ensure that it can manage risk in line with its risk appetite.

The regulator’s assessment of Flagship’s compliance with the financial viability elements of the Governance and Financial Viability Standard is unchanged. We have assurance that Flagship complies with the financial viability elements of the Governance and Financial Viability Standard and that its financial plans are consistent with, and support, its financial strategy. It has an adequately funded business plan, sufficient security and is forecast to continue to meet its financial covenants.

Flagship has material risks and exposures that it needs to manage. It is increasing investment in its existing homes while delivering a significant development and sales programme and is reliant on shared ownership sales surpluses to remain compliant with covenants. Delivery of this investment reduces Flagship’s covenant headroom and coupled with economic uncertainty in relation to inflation and interest rates, impacts its capacity to respond to adverse events.

Other providers included in the judgement

None

About the provider

Origins

Flagship is a community benefit society and exempt charity. The group’s principal activity is the provision of social housing.

Registered Entities

Flagship is the only registered entity in the group.

Unregistered Entities

There are four active unregistered entities in the group:

• Flagship Housing Developments Limited provides development services to the group and holds Flagship’s investments in joint venture undertakings;

• Gasway Services Limited delivers gas installation, repairs and maintenance services to the group’s properties and externally;

• Hopestead, a registered charity focussed on tackling homelessness; and

• Flagship Finance plc, which was incorporated to issue a bond on the capital market.

Flagship also has five dormant subsidiary companies.

Geographic Spread and Scale

Flagship owns and manages around 32,000 homes across the east of England.

Staffing and Turnover

For the year ended 31 March 2023 Flagship’s turnover was £253m.^{[footnote 1]} It employed 1,459 full-time equivalent staff.

Development

Flagship plans to deliver around 2,900 homes between 2024 and 2028. Most of these homes will be for affordable rent and shared ownership, with around 360 units developed for open market sale.

About our judgements

Key to Grades

Governance:

	Compliant
G1	The provider meets our governance requirements.
G2	The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.

	Non-compliant
G3	The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
G4	The provider does not meet our governance requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Viability:

	Compliant
V1	The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
V2	The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.

	Non-compliant
V3	The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
V4	The provider does not meet our viability requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Note: The use of an asterisk (*) against a grade indicates that the assessment refers to a provider that is designated as being for-profit.

Definitions of Regulatory Routes

In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.

Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.

Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.

Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.

For further details about these processes, please see Regulating the Standards.

1. Based on unaudited accounts for 2022/23. ↩