This is my second briefing to voting members, covering the Board's meeting of 9 October. I was unfortunately unable to attend this meeting so it was ably chaired by our Deputy Chair, Bill Davidson, who has filled me in on the Board's discussions.
At this meeting, the Board considered our audited accounts for 2016–17, proposals for an intervention in the electricity market, a review of CHOICE's brand and the agenda for our upcoming Annual General Meeting (AGM).
The Board received a report from Pitcher Partners, who had recently completed the audit of our 2016–17 accounts.
Overall, Pitcher Partners reported that the audit had gone well, with no material adjustments required and no new issues of significance identified. The Board approved the audited accounts so that they could be distributed with the notice of the AGM.
In terms of financial outcomes, the accounts reflect the fact that 2016–17 was a year of growth and investment, with increases in both income and expenditure. The greatest areas of increased investment were in the teams responsible for building and improving digital tools like our website, and in our 'New Things' team, which is charged with experimenting with new ways of helping consumers and new business models to support our purpose.
The bottom line result was a deficit of $0.9m, which would have been $0.4m if not for the effect of a grant received in a previous year. We had reported at the 2016 AGM that we expected to report a break-even result but during the course of the year it became clear to management and the Board that we needed to make an even greater investment in improvement and innovation. The $0.4m deficit, after the effects of the grant, largely represents investment in these areas.
While CHOICE cannot run deficits indefinitely, we are in a situation where we can invest some of the organisation's cash in increasing our impact, and the Board feels that this is what we need to do. We expect that deficits in the short term will result in surpluses in the medium to long term, creating a more sustainable organisation. We started to see some returns in 2016–17, with a 5% increase in revenue, driven in part by growth in memberships.
We ended the financial year with $11.2m, well in excess of the cash reserves floor of $4.7m set by the Board.
The Board is carefully monitoring financial performance in 2017–18 to make sure that our underlying financial position remains sound.
Intervening in the electricity market
Over the past few years, we have adopted the ambitious goal of transforming some markets where consumers are being ripped off because the market is simply broken.
At the start of this year, we identified the electricity market as one in which we might want to intervene and at the Board meeting management presented its analysis of the issues faced by consumers and the opportunities for CHOICE to make a difference.
One clear problem is that even if you want to check if you are on the best deal, this is very hard to do. Some voting members may already have participated in the trial of a new switching service that allows consumers to submit their electricity bill to CHOICE so that we can identify the best deal and then switch providers for the consumer. Having demonstrated that this service is feasible, CHOICE is now planning to launch it for all consumers early in 2018.
This won't, however, fix the very problems that mean that such a service is necessary. Far too many people are on expensive energy deals because the market is too complex to navigate. We are therefore planning to campaign for a range of changes to make it easier for consumers to compare deals and switch retailers, as well as better protection for consumers who don't switch, so that they don't end up being parked on the most expensive deals.
The Board will be excited to see these ideas progress in early 2018.
Our marketing team presented on some work they have been doing to review and improve the CHOICE brand. Given the costs and effort involved in making any changes, this is something that we have approached with caution but we now have clear data to demonstrate that there is a problem. When people use some of our products and services – such as the CluckAR free range egg app and our Complane airline complaints tool – most fail to recognise that these have been developed by CHOICE. That means that we're missing an opportunity to build awareness of our work, especially among younger consumers.
As a result, we're considering some changes to make CHOICE stand out more wherever people come into contact with us. This will include a change to our logo and a redesign of our website, apps and magazines. The Board had a look at the proposed changes and was very supportive. They provide a stronger, fresher representation of CHOICE without being a radical departure from our previous logos.
The CHOICE Consumer Insights team is currently testing some of the proposed changes with consumers. Assuming this research finds a positive reaction, the changes will be rolled out gradually, from late 2017.
Annual General Meeting
The Board approved the agenda for our AGM on 23 November, which you will receive within the next week. I hope that you will be able to join us in person or via the webcast. If you have any questions about the AGM, please contact our Company Secretary, Linda Magee, on firstname.lastname@example.org.
New home page
If you have not already checked out the new CHOICE home page, I encourage you to have a look. It does a much better job of presenting everything that CHOICE does, including our campaigns and investigations. It was developed in-house, which demonstrates the benefits of increased investment in our in-house digital team.
If you have any questions or suggestions for the Board or the CHOICE team, please feel free to contact me at email@example.com.
Chair of the Board