Shareholder Executive

Partnerships UK

Purpose

Partnerships UK's mission is to assist governments (local and national) and public bodies in the better delivery of public services. This is done through developing programmes, projects and companies, often in partnership with the private sector.

Legal Status and Ownership

Partnerships-UK is a public limited company, and is itself a PPP jointly owned by the public (49%) and private (51%) sectors.

Description of Rights

The principal rights that the Government has in addition to its voting rights are:

1. the right to nominate two nonexecutive directors. The two Treasury nominees in 2008-09 were Peter Schofield and Stephen Lovegrove
2. the right to appoint the individual members of the Advisory Council, which reviews the effectiveness of Partnerships UK in fulfilling its public sector mission.

Government's Objectives

Vision

To support and accelerate the delivery of infrastructure renewal, high quality public services and the efficient use of public assets through better and stronger partnerships between the public and private sectors.

Objectives

• contribute to making the public sector a more effective client in PFI/PPP projects by engaging directly in procurement and supporting development of policy and standardisation work
• ensure that PUK is the leading organisation in PFI/PPP market expertise, and that it recruits and retains top-quality practitioners so that advice to public sector customers is of the highest quality
• make a positive financial return (after payment of interest on Convertible Unsecured Loan Stock) whilst recognising that profit maximisation is not the objective
• adhere to best practice standards in corporate governance that are appropriate to its objectives, scale and nature of its operations and ownership.

Financial Performance

£m	2009	2008	2007
Turnover	23	19	17
Operating Profit excluding JVs	1	(1)	0
Profit/(Loss) for the year	12	(1)	12
Net Cash flow	(6)	(11)	46
Net Operating Assets	37	18	12
RONA	3.1%	(1.8)%	(3.0)%
Shareholders' Funds	32	18	23
Dividends	-	5	-

Dividend policy

Following the restructuring of the PfS Joint Venture, PUK reviewed its funding requirements, concluding that the business is over-capitalised for its prospective needs. In Aug 2009, PUK paid a dividend to shareholders of £4m and in September 2009 repaid £17.5m (50%) of the Convertible Unsecured Loan Stock. A new dividend policy is being formulated, still targeting an overall annual shareholder return of 12.5%.

Performance targets

Targets and objectives are based on earning target annual shareholder rates of return, using capital effectively, and further developing the business, including developing the Local Partnerships joint venture, ensuring that the business is future proof and improving the quality and breadth of public sector relationships.

Commentary

During the year, the Shareholder Executive continued to work closely with HM Treasury and the company, through our representation on the PUK Board.We monitored company performance, and advised on salient issues, including supporting the development of a revised dividend policy.

PUK improved its financial performance on the previous year. Revenues in 2008-09 increased to £23.1m, primarily reflecting the increased contribution from Partnerships for Schools (PfS) during the year, and strong growth in advisory contracts. In 2008-09, PUK made an overall profit before interest, impairments and tax for the financial year of £21.0m, mainly due to the £20.6m profit arising from the termination of the Partnerships for Schools joint venture on 31 March 2009, through mutual agreement with DCSF.The profit results from the accounting policy adopted by PUK which wrote off previous monies invested. Consequently, £16.7m of the termination payment represents repayment of monies invested in previous years, whilst the residual represented return on such monies invested. PfS contributed £7.5m revenue during the year and supported the opening of 50 new schools.

Joint Ventures nevertheless still remain important to PUK’s business and PUK has created a joint venture with the Local Government Association (incorporating 4Ps) into which PUK is proposing to transfer its Public Service Unit.This is expected to develop PUK’s capability to support a wider range of public bodies.

The investments business consolidated its position during the year, making one new investment and eight follow-on investments.Together these totalled £3.4m.

Looking forward, PUK aims to continue to develop its business further to discharge its public sector mission in an increasingly locally based context, and to ensure it builds a business that has sufficient flexibility and robustness to respond to the economic and political challenges ahead.