1. Growth through diversification Mark Henderson, Chief Executive, Home Group

3. What are the social business drivers for the 21 st Century? Asset/income protection? Business growth imperative? And/or: Risk aversion and sticking to core business – treading water?

4. Home Group’s Care and Support journey Phase 3: Focused national growth strategy Phase 2: Intelligence and Gateway Panels Phase 1: Locally led growth strategy

5. Acquired Stonham in 1998 – significant equity in the brand (excellent track record of delivery in the field of justice). Following acquisition, delivery characterised by bottom up, locally driven and delivered activity, including a significant number of Supporting People contracts. Goals were delivery of our social mission and developing relationships/winning contracts. Issues and lessons learnt: Lack of a focused central overview meant: Lack of a consistent model of delivery which could maximise efficiency and be replicated elsewhere; and Inability to compare profit & loss in a systematic way, or to compare and report on outcomes across all contracts.

6. Phase 2: Intelligence and Gateway Panels Took over national BASS contract in 2010. From 2012 started evaluating the specifics around profitability of all current and potential future Care and Support contracts. Issues and lessons learnt: Found some contracts were some loss making and being cross subsidised by other parts of the business. Busted widespread external myth that a care and support business couldn’t be profitable. Internal robust Gateway panel process developed to ensure all contracts we bid for will contribute to business sustainability and that we will maintain efficiency and excellence in service delivery.

7. Phase 3: Focused national growth strategy All potential Care and Support contracts subject to a continually refined Gateway panel process. As of 2013/14, moving further into Justice and integrated Health and Care opportunities, and developing a series of products/models to understand and compare outcomes more effectively. Currently reviewing our Corporate Strategy to ensure that this new approach is integrated with other parts of the business. Strong fit with national policy priorities.

8. Phase 3 issues and lessons learnt (so far) Vital to have a strong grasp on relative levels of profitability when entering potential new markets. Be careful if acquiring a new business that you don’t weaken the value of the original brand, as the brand alone can sometimes open doors to new commissioners (Stonham). Accessing new markets and developing trust with new partners takes time (potential domino effect in some areas in terms of accessing new opportunities in health, e.g. Norfolk). Risk around working in partnership on pilot initiatives – may not lead to long term contracts. Horizon scanning to understand what opportunities are emerging nationally to strongly position the business going forward.

9. Contribution of Care and Support to Home Group In 2013/14, Care and Support contributed £113m to Home Group’s £327m turnover. C&S also contributed £9.2m to the total £62m Home Group surplus in 2013/14. Not uniform contribution, e.g. variance between residential based and floating support in terms of respective contributions. Diversified business is entirely complementary to core business, e.g: Scale of shared service provision can bring about innovations and new ways of working.

10. Treasury Management Care and Support Asset Management Cash flow and the importance of modelling contract contributions Complex legal structures? Building the confidence of lenders, the regulator and the credit ratings agency No unsecured loans Relationship management and keeping them informed – be aware of the content of the loan documents and associated expectations Managed growth rather than radical change Lower operating margin than many of our peers without a Care and Support arm, but this is improving through modelling Talk about what we want to do and how we want to do it

11. What we found maximised chances of success in diversifying the business Build on existing strengths, knowledge and reputation Bring in new expertise Business benefited from people from different sectors with new perspectives Partnership working to target new areas (e.g. NHS) Be prepared to make wholesale systemic and cultural changes

12. What are the ‘do’s’ of diversification? Do learn the lessons of Cosmopolitan… Do ensure the Board is making fully informed decisions and prepared to challenge senior management Do consider mergers/collaborations/acquisitions to broaden expertise Do ensure senior management are drawn from wide ranging backgrounds and have a diversity of experience Do consider the balance of surplus and turnover Do ensure sufficient cash flow Do engage in robust due diligence and develop exit strategies Do measure and compare impact and outcomes

13. What are the ‘don’ts’ of diversification? Don’t bite off more than you can chew! Don’t be opportunistic without relating it to the business strategy. Don’t do nothing!!!

14. And above all, don’t forget why we do what we do! Social value and social mission Pursuing increase in surplus to enable us to deliver to those people who need our help, be it in the form of housing or support services

15. Mark Henderson Chief Executive Home Group Tel: +44 (0)191 290 7863 E-Mail: mark.henderson@homegroup.org.uk Web: www.homegroup.org.uk Twitter: @homegroup or @MarkGHenderson Blog: www.athomewithmark.orgmark.henderson@homegroup.org.ukwww.homegroup.org.ukwww.athomewithmark.org