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CHOICE voting member briefings 2019

At our Board meeting on 27 May, we discussed:

How we are tracking

We received a range of reports on how we're tracking against our targets and budget for 2018–19.

Under our new strategy, we track CHOICE's performance in three key areas: our impact, our online audience and our revenue.

The key way we track our impact is by the number of wins we help to achieve for consumers. On this measure, we've had a really solid year. Several significant pieces of legislation were passed in the final weeks of the last parliament, including laws to require electricity companies to offer better default prices, stronger obligations on financial institutions to make sure their products are fit for consumers, and powers for ASIC to intervene to curb the sale of dangerous financial products.

To help us grow the number of people who regularly visit choice.com.au, we made a number of changes to our editorial teams in 2018. Hopefully you will have gradually seen us publishing a broader range of articles both online and in our magazine. These changes are starting to have an effect, helping us to grow the visitors to our website, which is important to our sustainability.

Our revenue for the year is not as strong as we had hoped but we are expecting to end 2018-19 with modest growth, year on year.

We are forecasting to end the year with a deficit of around $1.8m, which is broadly in line with our budget and the intentional plan behind the deficit. Longer term voting members may recall that we are in the final stages of several years of deep investment in the organisation, which involves using some of our cash reserves to help the organisation to grow in the areas that are important to our future sustainability. Our cash reserves continue to remain at a healthy level and we expect our budget to move back into surplus within the next few years.

Priorities for 2019–20

Over the past few years we've moved away from setting a detailed annual business plan to setting three to four major priorities for each six-month period, to focus the attention of the organisation on the most important things that we need to achieve.

The management team presented our proposed priorities for the first half of 2019–20, which had been informed by a joint Board-management strategy workshop held in early April. Our priorities focus on:

  • improving subscriptions
  • reimagining membership
  • testing new ways of helping consumers in services markets
  • improving protection for consumers who seek assistance from mortgage brokers.

You will no doubt be pleased to see that membership is a major theme in these priorities.

We plan to improve the range of subscription options we offer to members, and test new ways to attract new members and encourage them to stay with CHOICE.

More importantly, we want to completely reimagine membership to build a new approach based on a deeper connection between members, CHOICE and our impact; a membership model that goes beyond a digital subscription. We're currently doing some research with members and supporters to inform this initiative. It's essential we consider deeply the views and thoughts of members so if you have received an invitation to participate, I encourage you to respond.

2019–20 budget

We approved a budget for next year to provide resources to support our priorities.

We are forecasting growth in revenue, especially from membership and our CHOICE Recommended licensing scheme. This in turn requires targeted increases in expenditure in areas that are necessary to drive this growth.

Overall, we anticipate a significant reduction in our deficit, as the impact of our investment over recent years takes effect. This will put us on track to return to surplus in 2020-21. Despite this deficit, we expect our cash reserves to remain healthy and well in excess of the minimum level required by our cash reserves policy, which is reviewed each year when we set the budget.

As part of reviewing our financial strategy, we also discussed some recent advice on the building that we own in Marrickville, Sydney (for those of you outside of Sydney, take a look at 57 Carrington St, Marrickville, NSW to get a sense of the size of the property). This provides an important home for CHOICE as well as rental income from an onsite childcare centre. The advice confirmed that our property is a valuable asset with a range of possible future uses. This reinforces our overall financial health and ability to continue investing in improving the ways in which we help consumers.

Company Secretary

Following the amicable resignation of our previous Company Secretary, Jessica Hill, earlier this year, the Board was pleased to appoint Sarah Coombs, who will fulfil the role alongside her responsibilities in the CHOICE strategy team. Sarah is legally qualified and has a good understanding of CHOICE's operations, so was an excellent candidate.

Sarah will help coordinate the Board elections and annual general meeting, and is happy to answer any enquiries on these issues. She can be emailed at companysec@choice.com.au.

Board elections

We have begun the process of preparing for the Board elections to be held later in the year. Our first undertaking is a skills audit to identify the most important skills required.

Three current directors will step down, and one – our Deputy Chair Bill Davidson – will reach his maximum term in November. Bill has considerable experience as a senior executive and CEO, including having previously acted as CEO of CHOICE. We have already identified that his departure will leave a critical gap in the Board, so we've started the search process for a person with similar high-level strategic and commercial skills. The position has been advertised online so please feel free to share it with anybody you think may be suitable who has the capabilities and experience we need. Interested candidates can contact Sarah Coombs in the first instance.

We also approved invitations to more CHOICE members to apply to become voting members. Having a large and vibrant base of voting members is important to ensuring that CHOICE remains a strong, democratic organisation. We currently stand at around 5800 voting members, a number which has remained largely steady over the years.

Other updates

Finally, we received updates on some of the important work that is underway inside the organisation.

This included an update on the work to close down our Transformer energy switching service, which provided valuable assistance to a number of voting members. I explained in my last Board briefing that we had decided to wind up this service because although we were excited about its potential, the risks of further investment had become too great.

The Board remains pleased about the impact that Transformer has had, for the individual consumers who we helped to save money and on the broader electricity market. Transformer helped us build the case for fairer default electricity prices (one of the reforms mentioned earlier in this briefing) and provided a model that has since been replicated in the NSW Government's Energy Switch Service, which is now freely available to residents of that state.

As Chair, and I know I speak for Alan as CEO and my co-directors, I feel the weight of the importance of this initiative, of the many positive effects it's had for Australians and for the market, but I also feel the weight of the sizeable risk it presented. It was a difficult decision for the Board, but the right one. As I also mentioned previously, we learned a great deal from Transformer and have worked hard to embed that learning into the organisation.

We are very excited about a new partnership with Super Consumers Australia that has allowed us to establish a small team of superannuation specialists within CHOICE. This will allow us to do deeper analysis of problems in the superannuation market, produce more information to assist consumers and campaign for reforms to the system. This is a meaty, complex area that affects the lives of all Australians so we're keen to get this up and running.

We're also working to secure larger, longer term funding for this project, which might allow it to be established as a standalone organisation. This is a great example of CHOICE using its unique role and expertise to take on a market where many consumers are confused and poorly treated.

I will be back in touch in August, with a further update on our work. As always, if you have any questions or suggestions, please email me at sldavey@choice.com.au – I would love to hear from you.

Welcome to my Board briefing for March 2019 

At our first Board meeting on 25 February, we discussed the Board's priorities for the year, the outcomes of the banking royal commission, our financial position, the Transformer energy switching service and our technology strategy.

Welcoming a new Board member

Following the 2018 election process, we welcomed Ben Heuston to his first meeting as a director. Ben brings strong commercial, tech and not-for-profit experience and we look forward to his contribution to the Board.

This was the second meeting for Ben Naparstek, who was co-opted to the Board in October 2018. With his background in digital, editorial and publishing he will bring a valuable perspective to the Board's deliberations.

Board priorities 

At the end of each year I spend time talking with each director and typically canvass their views on how the Board went, what their concerns and priorities are for the coming year, and if there are areas for myself, as Chair, to improve on, or pay close attention to. We discussed these further at the meeting and identified the following themes to focus on in our discussions with management during the year:

  • The sustainability of the organisation.
  • Ensuring we have the right targets and metrics.
  • Our technology strategy and investment.
  • Our value proposition and the underlying products and services we provide for members and supporters.

The Board will be joining management in a planning workshop in early April where we will explore these issues further. 

Royal commission

We discussed the outcomes of the banking royal commission, which was a major priority for CHOICE through 2018. It's pleasing to see some of our long-term priorities reflected in the recommendations – including the establishment of a last-resort compensation scheme for people who lose money as a result of poor advice or misconduct, and tighter regulation of mortgage brokers. 

Financial reforecast

As most of you know, management undertakes a quarterly reforecast of our financial performance and we reviewed the latest reforecast at the meeting. Consistent with the cycle of investment that we have been reporting to voting members over the past few years, we have budgeted for a deficit of $1.5m in 2018–19. This is allowing us to invest in technology upgrades and innovation around new business models to help consumers. 

2018–19 is proving to be a challenging year for CHOICE membership. A flat market for household appliance purchases – a key driver of new membership – along with increased competition from commercial comparison sites, means that we have attracted fewer new members than expected. We have, however, been carefully managing expenses, as well as growing our CHOICE Recommended licensing scheme.

Overall, this means that despite a challenging environment, we are on track to end the year close to our budgeted deficit.

Transformer energy switching service

Through 2018, we tested a new way of helping consumers find the best energy deal. The Transformer service was an ambitious innovation that allowed consumers to email in their energy bill, so we could analyse it and identify potential savings from switching to a better deal.

Like any innovation, Transformer required a period of investment while we were trying to see whether it was a viable long-term business model. In December, the Board decided that while we love the product and the positive impact it has had on the market, the risks involved in further investment were too great and it should be phased out. 

The costs involved in phasing out Transformer have been incorporated into our reforecast for the year. Transformer has been a sizeable project and investment for us, so at our February meeting we discussed what we learned through the process. We were particularly pleased with some of the achievements of Transformer, including:

  • analysing more than 13,000 customer bills and helping over 2500 people find a better deal
  • identifying over $1.8m in savings on their energy bills
  • inspiring the NSW government to introduce its own free service similar to Transformer

While we are phasing this product out, as a Board and organisation, we learned a substantial amount about how to grow and scale a new business model, and we developed real capabilities in how the product was developed and brought to market. These learnings will be extremely valuable as we identify and test other ideas.

Technology strategy 

Underpinning our ability to develop new products and services, engage and advocate on important issues for consumers and, importantly, service and look after our members, lies a suite of technology platforms and digital tools. In late 2018, the CEO appointed Will Walker as our Chief Data and Technology Officer. This was a new position recognising that effective use of data and technology is critical to our sustainability.

Will presented his initial thinking on technology strategy to the Board. This will involve ensuring that CHOICE has modern, flexible platforms that support our existing activities and business models, as well as allowing us to innovate and collaborate with partners.

Our technology strategy will require upgrading or replacing some of the big platforms that help drive CHOICE – such as the software we use to manage content on choice.com.au and communicate with members, and the platforms that enable member engagement.

While this will involve investment, we have also identified a number of opportunities to reduce operating costs through smarter technology decisions.

I look forward to keeping you informed of our progress and thinking through 2019. As always, if you have any questions or suggestions, I would love to hear from you: sldavey@choice.com.au.

Kind regards,
Sandra Davey
Chair of the Board