Decision

Previous regulatory judgement: Gentoo Group Limited (25 November 2020)

Updated 13 December 2023

Applies to England

RSH Narrative Regulatory judgement

• Provider: Gentoo Group Limited
• Regulatory code: L4313
• Publication date: 25 November 2020
• Governance grade: G1
• Viability grade: V2
• Reason for publication: Governance upgrade
• Regulatory route: In Depth Assessment

This regulatory judgement upgrades our previous assessment of Gentoo Group Limited’s (Gentoo) governance from G2 to G1 and confirms its existing viability grade of V2. Based on evidence gained from an IDA, the regulator has assurance that Gentoo’s governance arrangements enable it to adequately control the organisation and to continue meeting its objectives.

Our previous assessment, published in September 2019, upgraded Gentoo from G3 to G2. It recognised that the provider had established and strengthened its governance arrangements but that it still needed to improve some aspects of its governance to support continued compliance.

Recent IDA engagement has provided assurance that Gentoo has continued to make positive progress in developing and improving its governance. It has refreshed and simplified its approach to strategic planning and agreed a strategy that ensures a continued emphasis on its core functions as a social housing landlord. The strategy focuses on increased investment in current stock and an expanded programme of affordable home development.

Gentoo has enhanced its approach to risk management by restructuring its executive team and targeting recent board recruitment to align with the risks associated with the delivery of its strategy. It has also revised its risk framework and corporate oversight functions to improve assurance at an operational level. In addition, the systems and the quality of data supporting asset management investment and statutory compliance have been strengthened.

The regulator has assurance that Gentoo complies with the financial viability element of the Governance and Financial Viability Standard. Its financial plans are consistent with, and support, its financial strategy. It has an adequately funded business plan, sufficient security and forecasts to continue meeting its financial covenants.

Gentoo continues to have material financial risks it needs to manage. Investment expenditure in its business plan includes accelerated major repair programmes and constrains Gentoo’s financial performance in the short term. Market sales activity exposes Gentoo to housing market volatility and potential reductions in income.

These factors reduce Gentoo’s capacity and flexibility to cope with downside risk and require on-going management to ensure continued compliance.

Other providers included in the judgement

None

About the provider

Origins

Gentoo is a charitable community benefit society. The group was formed in 2001 to take a transfer of homes from Sunderland City Council. Its principal activities are the development, management and maintenance of social housing.

Registered Entities

Gentoo is the only registered entity in the group.

Unregistered Entities

Gentoo has four unregistered subsidiaries. Gentoo Homes Limited and Gentoo Developments Limited develop properties for market sale. Gentoo Genie and Genie Homeplan Limited administer the Financial Conduct Authority approved Home Purchase Plan.

Geographic Spread and Scale

Gentoo operates principally in Sunderland, where the group is based. It also has small numbers of homes in Northumberland, Redcar and Cleveland, and South Tyneside.

Gentoo owns and manages approximately 30,000 homes, the majority of which are for general needs, with about 200 being supported housing.

Staffing and Turnover

At 31 March 2020, Gentoo employed 1,084 full time equivalent staff and had a turnover of £172 million.

Development

Gentoo plans to develop about 1,870 units by 2025. Its programme comprises 940 open market sale units, 800 affordable rent and 130 shared ownership homes.

About our judgements

Key to Grades

Governance:

• G1 (Compliant): The provider meets our governance requirements
• G2 (Compliant): The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance
• G3 (Non-compliant): 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 (Non-compliant): 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:

• V1 (Compliant): The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
• V2 (Compliant): 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.
• V3 (Non-compliant): 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 (Non-compliant): 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.

Definitions of Regulatory Processes

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’.