The directors present the strategic report for the year ended 31 March 2023.
The Company's principal activities during the year continued to be focused on delivering programmes which reduce energy use, promote small scale renewables and support sustainable transport. Activities include the provision of impartial consumer advice, a variety of loans and grants programmes, supporting businesses with customer engagement, certification, accreditation and field trials of technologies, consultancy and data analysis. We also support and deliver research into practical solutions to reduce society's reliance upon carbon intensive energy solutions. Key financial and other performance indicators were as follows:
|
| As restated |
| 2023 | 2022 |
| £000 | £000 |
Gross transaction value | 90,875 | 87,974 |
Turnover | 83,482 | 86,892 |
Gross profit | 4,982 | 5,993 |
Operating profit / (loss) | (1,174) | (766) |
Profit / (loss) after tax | (1,127) | (803) |
Current asset ratio | 1.70 | 1.78 |
Loan funds under management | 296,095 | 266,615 |
Turnover decreased in the year by £3.4m primarily due to funding decreases to support the delivery of transport and renewables programmes, offset by an increase in advice and business development and international programmes. We continued to experience an increasing demand for loans to support policy-led energy efficiency and transport programmes. During the year the Company increased loans under management to £296m (2022 - £267m). The largest areas of loan funding during the year focused on supporting low carbon transport initiatives, home energy efficiency and district heating programmes, and Scottish business energy saving activities. These were offset by the net recovery of Covid emergency loans and loans supporting community and rural energy efficiency schemes. Losses after taxation were £1,127k (2022 losses – £803k). The Company uses ratio analysis, adjusted for assets and liabilities held on behalf of third parties, to monitor liquidity. The directors consider that the Company has adequate liquidity to meet all known working capital and creditor commitments as they fall due.
The directors assess the risks to the Company as part of the EST Group on a regular basis and address them via the Audit Committee which meets twice a year. The principal risks and uncertainties that the Company faces are as follows:
Short term Government grant funded programmes
Whilst the Group has diversified in recent year, it continues to benefit from a significant level of government grant funded activity, either directly or indirectly. Funding on this basis is commonly provided for single fiscal years only. It is not always possible to agree on indemnity with the funder to cover potential close down costs and therefore a redundancy risk exists for the group where there is a no demand elsewhere within the Group for similar skills once a programme concludes. However, we are seeing consistent year to year expansion in our government grant funded activity which reduces this risk, whilst we are also able to redeploy to other work as necessary.
Foreign exchange risk
Energy Saving Trust continues to deliver a number of European Union funded projects and initiatives despite the UK leaving the European Union. In doing so, EST has to bid for and accept work paid for in Euros. These programmes typically run for three-year periods with funding released during the life of the programme based upon pre-agreed delivery milestones. Whilst the Group seeks to manage all programmes profitably, exposure to currency fluctuations could lead to losses being incurred. Similarly, we run programmes in the global south for the IKEA Foundation paid for in dollars and this also exposes us to currency fluctuations, these programmes may increase in size, increasing our consequent exposure.
Tightness in the employment market for out sector
As the economy recovers from the pandemic and the climate emergency intensifies there is an increasing demand for the skills we require within the business and recruiting and retaining staff is becoming difficult. We continue to actively invest in our staff and their development to aid retention and remote working gives us the ability to recruit from a wider geographical pool for jobs which is a significant help. We are also assisted by the desire of many qualified people to work for us as a mission-led organisation.
Decisions at Energy Saving Trust are driven by the organisation’s mission to address the climate emergency. The UK and the Scottish, Welsh and Northern Ireland governments’ commitments to statutory net zero emissions targets means EST will continue to be at the heart of the movement towards a low carbon economy, working to reduce the UK's dependency on fossil fuels and raising awareness of energy efficiency, small scale renewables and sustainable transport. Much of our work to increase energy efficiency and the use of sustainable energy also results in a reduction in fuel bills as well as in carbon emissions and the current crisis in energy prices means ever greater interest, support and impact for our work.
We seek to grow the organisation to produce greater impact on both the ever-intensifying climate emergency and the fuel price crisis, investing in increasing the scale of our programmes and in reaching more people with our messages, in line with a strategic plan for growth approved by the Board and reviewed and updated each year. We are able to make this investment as any surpluses we generate are not distributed but reinvested to support and develop our mission. We continue to focus on key areas; currently these are extending our consumer advice services to reach more of the UK, growing our digital offerings and services and increasing the number of programmes and services we deliver in the key English market.
To address these key areas we have developed a number of state of the art tools to provide and use data on energy use and carbon emissions from homes whilst on sustainable transport, we work with a wide variety of partners to develop solutions that address and mitigate transport energy use and carbon emissions, including solutions to improve air quality. We also provide widely used information, data and insight on energy saving behaviours, insulation and energy efficiency, small scale renewable energy, sustainable transport and water efficiency. In the four nations of the UK, by collaborating with other organisations, we continue to engage with hard-to-reach audiences, including those on lower incomes and/or in fuel poverty, helping to remove the barriers that prevent vulnerable customers from getting the support needed to save money and reduce energy consumption.
Finally, beyond the UK, as well as continuing to play a key role in a number of EU-funded projects, we are also delivering projects funded by the Foreign, Commonwealth and Development Office and the Ikea Foundation to both improve access to energy efficient products and services in the developing world and to significantly reduce the costs of these products and services. We continue to develop opportunities in these areas, primarily through existing and growing relationships with Government departments concerned with overseas development, with charitable foundations and with philanthropic donors.
Energy Saving Trust’s work is also driven by its values of expertise, collaboration, impartiality and fairness, innovation, determination and support, and our reputation is high amongst our stakeholders as a result. In line with our values, we work collaboratively with a wide range of stakeholders in the public and private sectors and conduct regular surveys of our stakeholders to obtain their views of our work and shape it going forward. We also adhere closely to these values in our business relationships with suppliers, including ensuring we pay promptly on agreed terms. We have a strong focus on quality in all our services to our many thousands of customers, including investing in a dedicated customer service quality team. We treat all our customers fairly, with strong complaints procedures and a focus on learning from our customers’ feedback to drive continuous improvement. Our success in these areas is reflected in our high Net Promoter Scores for our customer-facing services.
Energy Saving Trust is also driven by its values in its approach to its own staff team. We use an annual employee engagement survey to find out what colleagues value about the organisation, what improvements they would like to see and what they think we are doing well. These results are considered at both senior leadership team and Board level and are the key input for a programme of continuous improvement of our work and of our employee value proposition. This year, in response to the survey, we upped our investment in training and development, appointing a dedicated training and development officer with a significantly increased training budget. In addition to the survey, we have also set up quarterly listening groups to allow us to hear directly from staff throughout the year. There is also an innovation forum which allows any member of the team to put forward suggestions to senior management.
We work closely with all four UK governments as key stakeholders and funders of our work and our work supports and contributes to many of their key policies and objectives. We maintain close liaison with a range of officials in all four governments and feed back lessons from the programmes that we deliver on their behalf to assist their policy development.
Energy Saving Trust’s work supports and empowers many communities across the UK through our range of programmes addressing fuel poverty, through other programmes supporting local authorities and housing associations and by assisting community organisations in developing community-owned renewable generation assets. Energy Saving Trust is naturally also very focused on its own impact on the environment, particularly its carbon emissions. The company has already taken a number of individual measures in this area, for example we have an interest-free loan scheme for all staff members which provides loans for energy efficiency and carbon-saving measures in their homes and a salary sacrifice electric vehicle leasing scheme. We have also appointed a net zero officer to drive our net zero transition and a sustainable procurement officer to work with our suppliers to reduce our Scope 3 emissions. A further part of our move to net zero is to source as much as possible from suppliers who are themselves committed to and actively working to achieve net zero status.
The directors are responsible for the maintenance and integrity of the company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors present their annual report and financial statements for the year ended 31 March 2023.
The loss for the year, after taxation, amounted to £1,127k (2022 – £803k).
The Energy Saving Trust is incorporated as a company limited by guarantee and has no authority to pay dividends. Members have the right to vote at annual general meetings and the obligation to contribute a maximum of £1 on winding-up should there be a call on the guarantee they provide.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
EST continually commits resource to the research and development of solutions that support online tools to aid customer engagement around solutions for reducing energy and water use.
The Company has strong regard to the interest of its staff team of more than 400, as they are at the heart of everything we do and we invest in their success. All employees have regular touch points with managers, as well as clear objectives and a personal development plan.
We provide access to a 24/7 employee assistance helpline via our Employee Assistance Programme, provided by Health Assured. There is also a staff recognition scheme by which employees’ achievements in line with our values are publicly celebrated. All staff are paid at least the real-living wage.
We use an annual an employee engagement survey to find out what colleagues value about the organisation, what improvements they would like to see and what they think we are doing well. These results are considered at both senior leadership team and Board level and are the key input for a programme of continuous improvement of our work and of our employee value proposition. This year, in response to the survey, we upped our investment in training and development, appointing a dedicated training and development officer with a significantly increased training budget. In addition to the survey, we have also set up quarterly listening groups to allow us to hear directly from staff throughout the year. There is also an innovation forum which allows any member of the team to put forward suggestions to senior management.
We also adhere closely to these values in our business relationships with suppliers, including ensuring we pay promptly on agreed terms. We have a strong focus on quality in all our services to our many thousands of customers, including investing in a dedicated customer service quality team. We treat all our customers fairly, with strong complaints procedures and a focus on learning from our customers’ feedback to drive continuous improvement. Our success in these areas is reflected in our high Net Promoter Scores for our customer-facing services.
Whilst not considered to be a KPI, Energy Saving Trust assesses the impact of its energy advice for a number of funding stakeholders. These are reported at a Group level and further information can be found on the accounts of EST (Holdings) Limited.
Our environmental performance
We have measured our complete greenhouse gas emissions inventory for the financial year 01.04.2022 –31.03.2023 (2022/23) in line with our science-based net zero targets and commitment to disclose our emissions. These are reported at a Group level and further information can be found on the accounts of EST (Holdings) Limited.
Azets Audit Services were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member, for our audit work, for this report, or for the opinions we have formed.
The income and expenditure account has been prepared on the basis that all operations are continuing operations.
The Energy Saving Trust Limited is a private company limited by guarantee incorporated in England and Wales. The registered office is 223-231 Pentonville Road, London, United Kingdom, N1 9NG.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £000's.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of EST (Holdings) Limited. These consolidated financial statements are available from Companies House.
A prior year reclassification has occurred to amend the classification of transactions to the most appropriate line item within the Statement of Comprehensive Income. The reclassification does not impact the overall result for the period or change the opening equity. As such no restatement note is included in these financial statements.
Interest income
Interest income is recognised in profit or loss using the effective interest method.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to surplus or deficit.
The Scottish Government has assigned responsibility for administering a variety of loan schemes to the Company.
The Company recognises revenue grants to fund the administration of the schemes as income in accordance with the accounting policy for turnover.
Under the schemes, funding has been provided to enable the Company to make loans available to recipients in Scotland. On receipt of funding, cash is recognised by the Company together with a matching creditor. As new loans are advanced to business and individuals, a debtor is recognised in the accounts of the Company. Loan repayments are utilised to reduce the scheme debtors. The Company understands that whilst the lending risk is, in the first instance, borne by the Company, the Scottish Government recognises that any losses can be funded from the unutilised cash loan pool and following appropriate authorisation, release the Company from any obligation to return or transfer the relevant matching funding.
The Department for Business, Energy and Industrial Strategy ("BEIS”) previously The Department for Energy and Climate Change ("DECC") has assigned responsibility for administering the PAYS ("Pay As You Save") loan scheme to the Company. This scheme provides interest free loans to householders to install energy saving measures in their homes. The loans are repayable over 25 years. The Company recognises revenue grants to fund the administration of the schemes as income in accordance with the accounting policy for turnover.
The administration of this scheme is outsourced to third party service providers who partner with the Company to administer the loans to householders and collect the loan repayments. All repayments collected by our partners are paid back to the Company on an annual basis. Following receipt, the Company has an obligation to repay to BEIS these amounts less any agreed administration fee owing.
The Company accounts for cash, debtors and creditors arising under the scheme on a gross basis, reflecting the amounts due from householders as debtors and amounts ultimately repayable to BEIS as a creditor on its balance sheet.
Finance Costs
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Exceptional items
Exceptional items are transactions that fall within the ordinary activities of the Company but are presented separately due to their size or incidence.
In the application of the Company's accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to the accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.
Key estimates and assumptions made by management are:
Revenue is recognised based on the policies set out in these financial statements. An element of judgement may be required when determining whether the Company should recognise as turnover various forms of pass through grant income and the corresponding charge to profit and loss.
The quantum of the provisions, shown in note 15, requires an element of estimation based on future outcomes from uncertain events.
Judgement has been applied in determining the accounting policy for loan schemes described more fully on page 16. Funds granted to provide loans by the Company to third parties are recognised as creditors and disclosed under the heading “loan fund grant creditors” in note 13 and 14, rather than recognised as income or borrowings. The Company judges it is inappropriate to account for the interest or bad debts arising in the Statement of Comprehensive Income. This is on the basis that as agent to the transaction, interest and bad debt is not due to or payable by the Company.
Grant income has been received to carry on public benefit activities in respect of energy efficiency and water saving initiatives.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 2).
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Exceptional costs in the prior year relate to a provision of £1m against an intercompany balance with a non-trading entity which were not considered to be recoverable.
Loan fund debtors are concessionary loans and are repayable from 0 to 25 years at an interest rate between 0-5%. Any loss on loan debtors are borne by the funder.
The cash balance of £175,883k (2022 - £154,066k) includes £171,225k held on behalf of third parties. This includes £162k (2022:£402k) funding for Grants payable on behalf of FCDO for the LEIA scheme, drawn from 2022/23 funding received of £1.58m (project to date: £9m).
Loan fund grant creditor balances of £296,095k (2022 - £266,615k) include Scottish Government Loans Schemes in Scotland and the PAYS Pilot Scheme ("Pay As You Save") in England.
Loan fund grant creditors are matched with loan debtors (see note 11) and restricted cash (see note 12). The amounts are interest free.
Dilapidations provisions have been made in respect of the Company leased properties in London and Edinburgh. These are reviewed annually and adjusted as necessary to reflect the best estimate of the liability.
Capital contributions
Capital contributions represent contributions from legacy company members to fund the long term working capital requirements of the Company. The sums were paid in the early years following the establishment of the Company and the directors are aware of no ongoing rights or obligations arising from the receipt of these funds. The intention behind the contributions was to encourage the Company to retain sufficient funding to support its working capital and risk management requirements.
Profit and loss account
This reserve relates to the cumulative retained earnings.
The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administrated fund. There were £162k (2022 - £8k) pension contributions accrued at the balance sheet date.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Included in the above is a building rent commitment of £893k (2022 - £305k). Rental commitments are included in relation to non-cancellable operating leases. Where the Company has the option to break the clause at a future date, lease payment have been included only up to this date and the miscellaneous costs.
During the year the company entered into the following transactions with related parties:
The immediate parent undertaking and ultimate controlling party is EST (Holdings) Limited (registered number: 09246829), a company registered in England and Wales.
The largest and smallest group of undertakings in which the results of the Company are consolidated is that headed by EST (Holdings) Limited. Copies of the group accounts are available from Companies House.