Cornwall Council's private company Corserv is currently running at a £4 million loss and as a result there won't be any dividends paid out to shareholders until the financial year of 2025/26. The local authority's corporate finance scrutiny committee heard the stark figure this week (Tuesday, July 23) while signing off the company's four-year business plan.
The deficit is due to "ongoing challenges" within the Corserv Group's facilities division and continuing support of Newquay airport’s costly operating subsidy. Corserv is a diverse group of Cornwall Council-owned businesses, providing infrastructure, engineering, jobs, social care, facilities management, inward investment, transport and other essential services to Cornwall and beyond.
The group includes Cormac - which manages and maintains 7,500km of roads in Cornwall as well as delivering major construction and engineering work - as well as Corserv Facilities & Fleet and Corserv Care, which includes STEPS, Care and Support, Trefula House, Lifeline and Assisted Living Services.
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The group has also created Corserv Solutions, a unified commercial entity with two subsidiaries, Cornwall Airport Newquay and Corserv Contracting, which it says is laying the groundwork for a more commercially-driven enterprise.
The Corserv group as a whole has operated at a deficit of £4.1m in 2023/24 and is expected to also run at a loss of £895,000 in 2024/25, following the expected transferral of the airport to a new company.
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Paul Cooper, interim chief executive of Corserv, told the meeting that Corserv's business plan for 2024-28 assumes that the airport will leave the Corserv Group on December 31, 2024, when the running of the airport will be taken over by a financial partner being sought by Cornwall Council. It currently looks as though that will be American property investment company Westcore.
That would save Corserv a considerable amount of money as would the refocusing of its facilities business. This would include the possibility of transferring Private Rented Accommodation (PRA) properties back to the council. No decision has been made in this regard but a decision will be made before September.
Revenue within the Corserv four-year plan is expected to reduce from £230m to £222m in 2028 with the forecast loss of revenue from the airport and the transition seen in facilities. Despite this revenue reduction, it is expected that margins will improve and profit before tax will rise from a deficit position of £4.1m to £8.2m by 2028.
Mr Cooper told the meeting there was actually "a close to £1.2m expectation" for shareholders in the period to 2025 rather than the end result of no pay out. However, he added a "strong return" was forecast from 2025/26 delivering a shareholder dividend in excess of £3.3m by 2028. The plan also forecasts Corserv will be in profit to the tune of £8m within four years.
Labour councillor Stephen Barnes asked Mr Cooper what element within Corserv gave him most concern. "The most immediate thing which I would say is of concern, meaning in need of the most immediate focus, is effective management over the next 12 months, so for the facilities company to manage its exit from loss-making contracts. That is the most critically important thing as that's the loss-making aspect of the business which we need to address."
Cormac aims to deliver a programme of £60m infrastructure for Cornwall’s growth through successful bidding on local authority work during the 2024/28 period. It aims to deliver a profit of £7m by 2027/28.
Independent councillor Adam Paynter said: "For many years we have been told that Cormac will gain work in other areas and bring in other work outside its direct council work. That is difficult because of where Cornwall is with only one border."
Mr Cooper told him the aim was a 50/50 balance between external and council work for Cormac by 2028. It currently operates with 20 per cent of external work, including for the Environment Agency and South West Water.
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