annual report & financial statements 2016/17 · lloyds bank plc oxford ox1 4aa ... with aspire...
TRANSCRIPT
Annual Report & Financial Statements2016/17
GreenSquare Group Limited
2
Contents 3 Board members, executive directors, advisors and bankers
4 Chair’s statement
7 Report of the Board
12 Strategic report
38 Independent auditor’s report to the members of GreenSquare Group Limited
40 Consolidated statement of comprehensive income
41 Association statement of comprehensive income
42 Consolidated and Association statement of changes in reserves
43 Consolidated statement of financial position
44 Association statement of financial position
45 Consolidated statement of cash flows
46 Notes to the financial statements
Report and financial statementsPeriod ended 7 April 2017
3
Board
Chair
H Gardner R Bailey (from 8 May 2017, Chair designate)
Vice Chair
C Victory-Rowe
Other MembersD CashP McLaughlinP Lowe (Audit Chair)P Starkey D Swann J Tibbitts (from 12 September 2016)K Roach (nee Law) (to 26 July 2016)L Mitchell (to 31 January 2017)S Palmer (to 31 January 2017)H Toplis (co-opted annually)
Registered numbers
Co-operative and Community Benefit SocietyNo. 7418
Homes and Communities AgencyNo. 4833
Executive directors
Chief Executive
H Toplis
Finance Director
S Murray (appointed 3 October 2016)
Operations Director
A Smith
Managing Director Development
B Wood (appointed 8 August 2016)
OD and Corporate Services Director
A Reilly (appointed 1 October 2016)
Secretary
M Arnold
Registered office
Methuen ParkChippenhamWiltshireSN14 0GU
www.greensquaregroup.com
External auditors
BDO LLP2 City PlaceGatwickWest SussexRH6 0PA
Principal solicitors
Anthony Collins LLP134 Edmund StreetBirminghamB3 2ES
Blake Morgan LLPSeacourt TowerWest WayOxfordOX2 0FB
Principal bankers
Lloyds Bank PLCOxfordOX1 4AA National Westminster Bank PLCChippenhamSN15 3HB
Board members, executive directors, advisors and bankers
4
Chair’s statement
It is with reflection that I present what will be my last Chair’s statement. After seven very fulfilling years as Chair of this great organisation, I will be standing down as Chair, and from the Board, following the AGM in July 2017.
In many ways GreenSquare is now a very different organisation from the one I joined in 2010. My time as Chair has been a period of great change not only for GreenSquare but economically and politically, with the last two years seeing some of the most fundamental changes in the housing sector I have ever experienced.
In my statement last year I reported that with the then government’s announcement that the majority of our rents would reduce by 1% a year for the next four years, we would have to operate on a much-reduced income; for GreenSquare that meant needing to fill a £10 million gap over the four year period.
As a Board, we realised that would mean changing the way we provide our services, and continuing to drive for greater efficiencies in what we do – as well as looking to generate additional surpluses from some of our non-core activities.
The first part of these changes have been completed in the last twelve months, with a renewed focus on providing our core housing service and the establishment of a single customer contact centre in our Chippenham office.
In August we welcomed Barry Wood as Managing Director of our house building subsidiary GreenSquare Homes. Barry joins us with an extensive career in the housebuilding industry and has been charged with delivering an annual surplus of £5 million from our housing for sale activities, to help compensate for the £10 million gap, and to continue to build social housing. Two sites have been purchased this year and, with a new funding stream planned to complete in July 2017, activity is expected to increase significantly over the coming months.
Other significant achievements this year have included:
• The successful amalgamation of GreenSquare, OCHA, and Oxbode on 7 October 2016. This not only brings efficiencies to our governance, administration and finance functions but also provides a clearer and more transparent structure for our customers and other stakeholders.
• Securing £458,100 from the Big Lottery Fund to continue, and develop, our Rose Hill Regeneration project, and support activities for residents in Rose Hill, Oxford. This four-year grant will help provide extensive support for children and young people many of whom live in poverty; it will also enable a partnership with Aspire Oxford to help adults into training and employment – so making a real difference to the lives of many.
5
• The completion of 40 apartments for shared ownership and sale at our Barns Place development in summer 2016 – part of our partnership with Oxford City Council to develop 108 new homes and community facilities in Cowley and Northway. Barns Place’s striking architecture was later recognised by RIBA with a South Regional Award. And I was on the rooftop of that building, with many of its new residents, last summer to celebrate our 150th anniversary – GreenSquare’s Oxford origins date back to the creation of Oxford Cottage Improvement Company Limited on 10 August 1866.
• Establishing an in-house gas servicing team to carry out all annual gas services for customers across Wiltshire, Gloucestershire and Oxfordshire. No longer using external contractors will help us to save money and provide a more flexible and efficient service.
Our Group net surplus for the period was £10.6m and our financial performance is reflected in the changes and challenges ahead. We have delivered 128 new homes into management at a cost of £18.5m and invested a further £10.7m into improving our existing homes. Every pound of surplus is invested to benefit residents, our future residents and users of our services with our desire to retain a strong financial profile and to support our Corporate Plan over the next ten years.
The Board is certainly mindful that 2016-17 has been a particularly challenging year, although we have still achieved much as an organisation and for our customers. We have done this because everyone, staff and Board members alike, continue to remain driven by our fundamental desire to keep delivering on our mission – to increase the opportunities for people to
Barns PlaceRose Hill
With Robin Bailey
Barry Wood (left)
6
thrive by building great homes and communities.
The Board has appointed Robin Bailey as my successor to chair GreenSquare. Robin and I have been able to work together for a few weeks to ensure a good handover of responsibility prior to the AGM at the end of July; I am absolutely confident that he is the right person to lead GreenSquare going forward.
It has been a fantastic seven years for me and a privilege to chair GreenSquare for which I would like to thank everyone.
I wish Robin, the Board and staff continued success into the future.
Hilary GardnerChair27 June 2017
Hilary with residents and Howard Toplis on the roof of
Barns Place
7
Report of the Board
The Board of GreenSquare Group Limited is pleased to present its report together with the audited financial statements for the period ended 7 April 2017.
During the period there was the following change to the Group’s structure:
On 7 October 2016 three of the Group’s main registered societies – GreenSquare Group Ltd, Oxford Citizens Housing Association Limited (OCHA) and Oxbode Housing Association Limited (Oxbode) – formally merged under section 109 of the Co-operative and Community Benefit Societies Act 2014. This was designed to rationalise the operation of the Group following a period of consultation with stakeholders. The new GreenSquare Group Limited being the newly formed parent company under which the merged organisations and Group would operate.
The merger has been accounted for using the merger accounting principles set out in Financial Reporting Standard 6. Accordingly, the financial information for the current and comparative periods has been presented as if the entities had been merged throughout these periods. The new GreenSquare Group Limited parent Association accounting reference date is 7 April to comply with the Co-operative and Community Benefit Societies Act 2014 and Financial Conduct Authority (FCA) regulations.
GreenSquare Group (‘the Group’) now comprises GreenSquare Group Ltd (‘the Association’) and its subsidiaries Westlea Housing Association Limited, GreenSquare Community Housing, GreenSquare Homes Limited, GreenSquare Construction Limited, GS Energy
Services Limited, and GreenSquare Estates Limited. The financial statements are prepared on a group basis thus reflecting activities of the subsidiary companies as well as the Association.
More detail of the Group’s structure and its activities is set out in Note 34 of the financial statements.
Principal activities
GreenSquare is a public benefit entity administered by a Board of Management. Its subsidiaries provide and manage affordable rented housing and develop private housing for rent and sale.
As well as owning and managing 11,685 properties, GreenSquare is a major developer of new affordable housing and is a lead development partner under the HCA National Affordable Housing Programme (NAHP). The Group employs 519 staff on a full time equivalent basis. Any surpluses made by the subsidiaries are retained within the Group.
GreenSquare is a major provider of housing, regeneration, care and support and commercial services across Wiltshire, Oxfordshire, Gloucestershire, Swindon and the surrounding areas.
Business review and future developments
Details of the Group’s performance for the year and factors likely to affect its future development are contained within the strategic review that follows this report.
8
Basis of accounting
The Group transitioned from previously extant UK GAAP to FRS 102 in the previous year ended 31 March 2016. The key changes were the adoption by the Group of deemed cost transitional relief and to account for its housing property assets at deemed cost and the recognition of the net present value of any contractual agreements for past deficit pension contributions. There have been no further material changes this financial year.
Customer involvement in governance
The involvement of our customers in our governance framework is pivotal to how we shape and develop our new homes and services. Customers are involved with some of our Committees, in particular the Customer Service Committee which comprises five customer members and five independent members.
The Customer Service Committee is responsible for approval of stakeholder engagement arrangements and communication with residents, including the annual report. The Committee hears the voice of the customer, looks to understand their needs and enable the Scrutiny Panel to drive improvements in satisfaction. Their role also includes approval of key customer strategies and policies, as well as monitoring the delivery of action plans and performance information, which underpin these (this includes key performance indicators and complaints reports). The Committee also recommends the operational budget to the Group Board, and undertakes ongoing monitoring of the budget during the year.
Efficiency
The Board is committed to delivering an effective and efficient service to residents and other stakeholders, and uses a range of strategies to increase efficiency including re-evaluating procurement policies; use of our own building contractor; strict budgetary control; applying techniques to improve procedures that add value to the customer; benchmarking with others; and reducing staff turnover, sickness and absenteeism.
Employees
One strength of the Group lies in the quality and commitment of its employees.
The Group’s ability to meet its objectives and commitments to residents in an efficient and effective manner depends on the contribution of employees throughout the Group. The Group aims to be an employer of choice in the area in which it works.The Group is committed to ensuring a diverse and inclusive environment for all its employees; it continues to invest in staff training and development and has improved systems of appraisal and performance management.
Health and safety
The Board is very much aware of its responsibilities on all matters relating to health and safety. The Group has adopted robust health and safety policies, and provides Board and staff training and education on health and safety matters.
Board members and executive directors
Those Board members who served during the period and the Group’s executive directors are set out on page 3. This year there have been changes to the Board, as follows:
As part of our succession planning we are pleased to welcome Robin Bailey who joined the Board in May 2017 and brings a wide range of experience to the Group. He has been appointed Chair designate with Hilary Gardner handing over the role prior to the AGM. John Tibbitts joined the Board having chaired the Development Committee. Three other Board members, Kerry Roach (nee Law), Stuart Palmer and Luke Mitchell stood down.
The executive team has undergone some changes in its membership during the year following simplification of the structure. Kim Humberstone and Tom Pritchard resigned during the year. Barry Wood joined the Group as Managing Director Development in August 2016 and Scott Murray and Abigail Reilly were appointed Finance Director and OD and Corporate Services Director respectively in October 2016. The other executive directors served throughout the year.
GreenSquare provides a range of central services – governance, finance, development, human resources and information technology – to its subsidiaries, under the scope of an intra-group agreement. The executive directors are the Chief Executive, the Operations Director, the Finance Director, the Managing Director Development and the OD and Corporate Services Director. They act as executives within the authority
9
delegated by the Board and have been employed directly by GreenSquare, providing services via this intra group agreement.
The Chief Executive holds no interest in the Association’s shares and has been co-opted to, and acts within, the authority delegated by the Board.
The Group has insurance policies which indemnify its Board members and executive directors against liability when acting for the Association.
The BoardThe Board comprises up to twelve non-executive members and is responsible for the Group and Association’s strategy, policy framework and managing the affairs of the Group.
The Board members are drawn from a wide background bringing together professional, commercial and local experience.
The Board delegates the day-to-day management and implementation of that framework (via the intra group agreement) to the Chief Executive and other members of the Group’s executive team.
Independent and resident Board members are selected by a panel of Board members (including the Chair and the Chief Executive) following public advertisement for recruitment.
Service contractsThe executive directors are employed on the same terms as other senior managers – their notice periods are three months.
PensionsThe executive directors are members of the Social Housing Pension Scheme, which includes both a closed defined benefit (final salary) and defined contribution pension scheme. They participate in the schemes on the same terms as all other eligible staff and the Group contributes to the schemes on behalf of its employees.
Other benefitsThe executive directors are entitled to other benefits such as the provision of cash allowances in lieu of a company car. Full details of their individual remuneration packages are included in note 11 to the audited financial statements.
Remuneration policyThe Remuneration Committee, comprising the Chair and a minimum of two other Board members, is responsible for setting the Group’s remuneration policy for its executive directors and other staff. It also recommends to the Board the remuneration levels for Board members.
The Committee pays close attention to remuneration levels in the sector in determining the remuneration packages of the executive directors. Basic salaries are set having regard to each executive director’s responsibilities and pay levels for comparable positions.
Statement of the responsibilities of the management Board for the report and financial statements
The Board is responsible for preparing the report and financial statements in accordance with applicable law and regulations.
Co-operative and Community Benefit Society legislation requires the Board to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards as reflected in FRS 102 and applicable laws). Under the Co-operative and Community Benefit Society legislation the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and surplus or deficit of the Association for that period. In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards and the Statement of Recommended Practice (SORP) Accounting by Registered Social Housing Providers update 2014, have been followed, subject to any material departures disclosed and explained in the financial statements;
10
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and Association and enable it to ensure that the financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008, and the Accounting Direction for Private Registered Providers of Social Housing 2015. It is also responsible for safeguarding the assets of the Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In so far as each member of the Board is aware:
• there is no relevant audit information of which the Association’s auditors are unaware; and
• the Board has taken all the steps that it ought to have taken to make itself aware of any relevant audit information and to establish that the auditors are aware of that information.
The Board is responsible for the maintenance and integrity of the corporate and financial information on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Statement of compliance
In preparing this report a review of Group governance procedures has been undertaken and the Group complies with the HCA Governance and Financial Viability Standard.
NHF Code of Governance
The Association and all registered provider subsidiaries in the Group comply with the principal recommendations of the NHF Code of Governance 2015 and have adopted a number of policies and procedures to help achieve these.
Internal controls assurance
The Board acknowledges its overall responsibility, applicable to all organisations within the Group, for establishing and maintaining the whole system of internal control and for reviewing its effectiveness.
The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and to provide reasonable, and not absolute, assurance against material misstatement or loss.
The process for identifying, evaluating and managing the significant risks faced by the Association is ongoing and has been in place throughout the period commencing 1 April 2016 up to the date of approval of the annual report and financial statements.
Key elements of the control framework include:
• Board approved terms of reference, including a detailed intra-group agreement between the Association and its subsidiaries, supported by detailed service level agreements and delegated authorities for Group Audit, Finance and Remuneration & Selection Committees;
• clearly defined management responsibilities for the identification, evaluation and control of significant risks;
• robust strategic and business planning processes with detailed financial budgets and forecasts;
• review of the Association’s risks by the Board and Group Audit Committee;
• formal recruitment, retention, training and development policies for all staff;
• established authorisation and appraisal procedures for all significant new initiatives and commitments;
• appraisal of major development projects by the Group Development Committee;
• a sophisticated approach to treasury management which is subject to external review on a regular basis;
• regular reporting to senior management and the Board/appropriate committee of key business objectives, targets and outcomes;
11
• Board approved whistleblowing, disciplinary and capability policy which covers expectations of fraud and code of conduct;
• detailed policies and procedures in each area of the Association’s work; and
• regular monitoring of loan covenants and requirements for new loan facilities.
A monitor on fraud is maintained and reviewed by the Group Audit Committee at every meeting. There were no frauds reported during the period under review.
The Board cannot delegate ultimate responsibility for the system of internal control but has delegated authority to the Group Audit Committee to regularly review the effectiveness of the system of internal control. The Group Audit Committee was formed to oversee the internal control framework for all companies within the Group.
The means by which the Group Audit Committee reviews the effectiveness of the system of internal control include considering risk reports, internal audit reports, fraud reports, management assurances, the external management letter and specialist reviews on areas such as treasury, health and safety, and efficiency. The Group Audit Committee received and considered reports from management on these risk management and control arrangements at each meeting during the year and the Board received its risk report quarterly during the year.
The Group Audit Committee has received the Finance Director’s annual review of the effectiveness of the system of internal control for the Group, and the annual report of the internal auditor, and has reported its findings to the Board.
Going concern
The Group’s business activities, its current financial position and factors likely to affect its future development are set out within the strategic report. The Group has in place long-term debt facilities , which provide adequate resources to finance committed reinvestment and a development programme, along with the Group’s day-to-day operations. The Group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders’ covenants.
On this basis, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months after the date on which the report and financial statements are signed. For this reason, it continues to adopt the going concern basis in the financial statements.
Auditors
BDO LLP have been appointed as external auditors to the Group and Association following an independent tender process in accordance with the applicable legislation for each group entity.
The report of the Board was approved on 27 June 2017 and signed on its behalf by:
H GardnerChair
12
FRS1022017£’000
FRS1022016£’000
FRS1022015£’000
Old UK – GAAP2014£’000
Old UK – GAAP2013£’000
Group Statement of Comprehensive Income
Total turnover 85,838 83,826 80,316 62,665 56,238
Income from lettings 63,494 60,212 57,342 53,007 49,097
Operating surplus 22,854 18,191 17,941 11,132 13,054
Surplus for the period before transfers 10,815 5,698 8,533 4,060 4,488
Group Statement of Financial Position
Housing properties net of depreciation and investment properties
675,764 662,863 666,682 622,150 545,174
Net current assets/(liabilities) 69,791 42,870 32,037 20,466 20,310
Loans (due over one year) 365,844 339,096 338,876 312,077 281,075
Provisions 5,765 6,619 4,759 118 84
Net pension liability 8,410 6,918 8,793 7,939 6,678
Reserves
Revenue 74,632 60,420 49,479 50,108 48,418
Revaluation 277,228 280,802 284,334 278,148 235,092
Total 351,891 341,256 333,849 328,256 283,510
Accommodation figures
Total housing stock owned and managed at year end (number of units):
11,685 11,998 11,734 11,520 11,105
In development 210 147 303 471 159
Strategic reportFive year summary
The Group’s five year income and expenditure accounts and balance sheets are summarised below:
13
Principal activities
GreenSquare Group is a major provider of housing, regeneration, care and support and commercial services across Wiltshire, Oxfordshire, Gloucestershire, Swindon and the surrounding areas.
We have the following key business streams:
• ‘general needs’ housing for rent, primarily by families who are unable to rent or buy at open market rates;
• supported housing and housing for older people who need additional housing-related support or additional care;
• low-cost home ownership, primarily shared ownership whereby residents purchase a share in the equity of their homes and pay rent to the Association on the remainder;
• property development and construction undertaken by our commercial subsidiary GreenSquare Homes Limited;
• installation of gas heating systems is undertaken by our commercial subsidiary GS Energy Services Limited; and
• investment and maintenance of public open spaces is undertaken by our commercial subsidiary GreenSquare Estates Limited.
As well as managing over 11,600 properties, we are a major developer of new affordable housing and a lead development partner under the HCA National Affordable Housing Programme (NAHP).
The Group’s focus remains on its social housing activities and these are expected to continue to constitute the majority of the Group’s activities by turnover.
Business and financial review
The Board is pleased to report a surplus for the period before transfers of £10.8m (2016: £5.7m) on a turnover of £85.8m (2016: £83.8m).
We see maintaining strong financial strength and sustainability as one of our key corporate objectives, because without it we will not be able to achieve our broader aims. We have continued to invest in both our existing housing stock and undertake a series of new developments, for both sale and rent.
128 new homes were transferred into management during the year. There were 45 strategic property disposals, 8 RTB sales and 36 partial or full shared ownership staircasings plus 35 outright sales as part of the successful GreenSquare Homes development for sale.
The Group continues looking forward to future development opportunities and there are 210 more properties/bed spaces on site in development.
The net worth of the Group increased to £351.9m (2016: £341.3m).
The Group had net current assets of £69.8m and manages its working capital around the loan facility.
14
Objectives and strategy
Our Corporate Plan 2015-25, approved by the Board in January 2015 and reviewed every year, provides an exciting and challenging focus of the choices we face and the changes we need to make to the way we do business over the next ten years.
Our purpose is ‘Passionate about great places to live’.
At GreenSquare we make a difference.
We increase the opportunities for people to thrive by giving them access to great homes and services to match. This supports the creation of strong and vibrant communities.
We make a difference to people’s lives – and this is something we want to continue doing, for more people, every day. Our values guide our actions.
All for one – we work as a team.Do what it says on the tin – we get it right first time.The things we could do – we actively look for ways to improve. Boo to bureaucracy – we keep it simple.
We have revised our organisational objectives, agreed long term aspirations, identified focused business change priorities and reviewed our operating model. We have defined six key strategic objectives that guide our direction of travel to achieve future success:
• Valuing our customers• Meeting housing and related needs• Growth with a purpose• Every penny counts• Able to stand on our own• A great team
The Board and senior management have developed a series of key performance objectives to monitor performance against this vision. The Board reviews these objectives annually in order to support our commitment to continuous service improvement.
15
Strategic objectives Outcome Five year performance target
Valuing our customers
Our homes will be at a quality that we can be proud of, with services to match. When someone is looking for a great place to live, we want them to think about GreenSquare first. We will have a good understanding of all our customers so that we can deliver what they need in a way that suits them.
• Redefine our approach to customer experience to ensure we deliver great customer service
• Maintaining performance during review
• Ensure customer satisfaction with the services we deliver
• Understand our customers diversity to help inform the development of services
• Ensure that our customers can contact us and get the help and information they need, taking into account those who may be vulnerable or less able to access our services
• Ensure we listen to and act on feedback from our customers
• Ensure that we resolve complaints effectively and use what we learn from them to improve our services
• Working in conjunction with partner agencies, to tackle and prevent antisocial behaviour
• Ensure timely and good quality repairs and grounds maintenance services
• Maintain the overall quality of our homes
Annual targets are set but the new five year performance targets are to be defined as part of the 2017/18 customer experience strategy review.
Meeting housing and related needs
Our customers will include those looking for their first home right through to those who need a home that meets their support needs. We aim to protect the valuable social housing we have.
We will use our particular skills and resources to help provide support services to help people improve their lives.
• Protect the number of homes available for social rent
• Minimise failure of GreenSquare tenancies
• Provide good quality support services (existing contracts)
• Identify and consider new opportunities to provide good quality support services to people in the communities in which we operate
• >9,565
• Evictions and abandonments to increase by less than 5%
• Positive outcomes for at least 85% of support customers
• Secure continuing funding for current support contracts
• Grow the overall Supported Housing function (including 55+ and Partnerships schemes as well as support contracts) by 20% by 2020
• All contracts to be in core operational area to be min cost neutral and give clear benefits to our customers OR make minimum of 10% contribution and be in adjacent local authority areas
• Support contracts income not to exceed 10% Group turnover
Growth with a purpose
We will increase the number of new good-quality homes for affordable rent, purchase and shared ownership.
• Increase the number of high quality homes available to meet the housing needs of customers
• Strategically manage our assets (regeneration and strategic disposals) to maximise our ability to increase number of good quality affordable homes
• Programme of 1,000 (min) retained homes over five years
• By 2025, we want to have added at least 2,000 new affordable homes
• To be confirmed in conjunction with wider development programme.
16
Strategic objectives Outcome Five year performance target
Every penny counts
By maximising opportunities, working smarter and increasing efficiency across the group, we will have more resources to create more great places where people want to live.
• Focus on working smarter and increasing efficiency through the transformation of our processes, structures, systems and technology
• Improve our approach to procurement to enable us to ‘buy better’
• Minimise the level of lost income through voids, arrears, and bad debts
• Management costs reduced to £1,024 per unit
• Operating margin 28%
• £450K gross reduction on procurement spend compared to 2016/17
• The changes to the benefit system ie welfare reform and Universal Credit will impact performance in this area. All claimants are expected to have migrated to Universal Credit by 2022. This will impact arrears and bad debt performance with the transition period being the worst, partly as a result of the minimum seven week delay in payments being made to claimants built into the system. Further welfare reform changes such as benefit cap, shared room rate for some under-35s, and removal of housing costs for some under 21s will impact on our ability to let properties. We’re working with the NHF on welfare reform changes and the creation of a more flexible rent policy from 2020. Policy may change subject to upcoming review.
• Our aims are to continue to try to minimise lost income in these areas through active campaigning and internal management practices and work on this will continue through 2017/18 to develop strategies and confirm targets for future years. Currently the financial plan includes the following assumptions:
– Void rent loss: <1%
– Rent arrears as a percentage of rent we are owed: 4%
– Bad debts 1% reducing to 0.75% in 2020/21
Able to stand on our own
We will develop our commercial activities to make a profit to support our growth and add financial strength to the group. We will carry out commercial activity to support our social purpose, never as an end in itself.
• Generate profit from GreenSquare Homes (build and sales programme)
• Generate profit from GS Energy Services Ltd (gas installation/servicing subsidiary)
• Generate profit from GreenSquare Estates Ltd (public open spaces)
• Generate profit from first tranche shared ownership sales
• £5m per annum
• £92,500 operating surplus before tax
A great team
We will continue to develop a culture that encourages people to meet their potential and deliver excellent customer service.
• For colleagues to see GreenSquare as a great place to work and be engaged in what we are trying to achieve
• To build a culture where people feel empowered and constantly strive to improve our performance, particularly in relation to providing great customer service
• Ensure colleagues have the right skills and capabilities to do their jobs and develop to meet their potential
• To have a diverse team so that we can shape and influence the delivery of fair and accessible services
• Engagement Index 80%
• 80% of colleagues’ feedback that the culture in their own team is consistent with our culture framework ‘How we do things around here’
• 75% of colleagues report that our leaders and managers meet our leadership expectations
• 80% of colleagues say they have had adequate training to do their job properly
• % of BAME colleagues representative of population demographic
• % of colleagues with a disability representative of population demographic
17
Value for money statement
Purpose of this statement: to articulate and demonstrate the delivery of a comprehensive and strategic approach to value for money in the achievement of our strategic objectives.
What is value for money?
In simple terms value for money is the relationship between effectiveness, economy and efficiency. Achieving value for money means that we can better deliver the aspirations in our corporate plan.
It is about making sure that the right service is being delivered at the right price.
As noted, GreenSquare has the following six strategic objectives:
Valuing our customersOur homes will be at a quality that we can be proud of, with services to match. When someone is looking for a great place to live, we want them to think about GreenSquare first. We will have a good understanding of all our customers so that we can deliver what they need in a way that suits them.
Meeting housing and related needsOur customers will include those looking for their first home right through to those who need a home that meets their support needs. We aim to protect the valuable social housing that we have. We will use our particular skills and resources to help provide support services to help people improve their lives.
Growth with a purposeWe will increase the number of new good-quality homes for affordable rent, purchase and shared ownership.
Every penny countsBy maximising opportunities, working smarter and increasing efficiency across the Group, we will have more resources to create more great places where people want to live. Able to stand on our own We will develop our commercial activities to make a profit to support our growth and add financial strength to the Group. We will carry out commercial activity to support our social purpose, never as an end in itself.
A great teamWe will continue to develop a culture that encourages people to meet their potential and deliver excellent customer service.
Our value for money goals:
The achievement of value for money is explicit in our business plan for 2017-22 with specific goals identified to deliver key strategic objectives:
Every penny counts• Focus on working smarter and increasing efficiency
through the transformation of our processes, structures, systems and technology.
• Improve our approach to procurement to enable us to ‘buy better’.
• Minimise the level of lost income through voids, arrears, and bad debts.
Growth with a purpose• Strategically manage our assets (regeneration and
strategic disposals) to maximise our ability to increase the number of good quality affordable homes.
And our values and culture are the key driver for achieving value for money at GreenSquare:
All for one – we work as a team. Do what it says on the tin – we get it right first time.The things we could do – we actively look for ways to improve.Boo to bureaucracy – we keep it simple.Great homes and services
Strong and vibrant communities
Economy
Effectiveness
Efficiency
18
Maintaining a strategic focus on value for money
Our business planning cycle and performance management approach ensures that we maintain a strategic focus on value for money.
Access to a range of benchmarking data and other metrics allows us to see:
• how performance in key areas of the business compares with others (are we good?);
• what it costs to deliver our services relative to others (are we expensive?); and
• what are our cost drivers are eg overheads (why our costs are what they are).
We use this information to make informed decisions about what we need to do differently as part of the business planning process. In other words, we actively look at the information and identify what changes we need to make – for example, do we have the right model for delivering ‘x’ service, do we have the right structure?
This information is used to set our targets for the business plan and operational metrics to measure progress. Performance is then monitored and challenged via our collaborative management teams, who have a specific focus on key business areas, our Leadership team and our Board.
We will be participating in the pilot of the Sector Scorecard during 2017/18 to further inform our approach into 2018 and beyond.
Operational performance management
JUN SEP DEC MARJUL OCT JAN APRAUG NOV FEB MAY
Quarterly HM data Quarterly HM dataQuarterly HM data Quarterly HM data
HouseMark submission
June
HouseMark results
September
Other benchmarkng data
eg ICS/Shape up
Business plan process (actions informed by benchmarking data)
Oct–Jan
Business plan sign offMarch
VFM statementMay
19
Managing and monitoring our performance
Our ‘plan on a page’ provides an at a glance overview of performance against all our business plan targets on a quarterly basis. The detailed performance information is also available on our intranet.
L A N D L O R D S AT I S FA C T I O N
L A S T C O N TA C T S AT I S FA C T I O N
% V O I D R E N T L O S S
O P E R AT I N G M A R G I N
M A N A G E M E N T C O S T P E R U N I T
Valuing our customers
Meeting housing and related needs
Able to stand on our own
A great team
Growth with a purpose
Every penny counts
1
1
1
1
1
1
2
2
2
2
3
2
2
3
3
3
3
34
4
4
5
4
56
7
8
9
20
Customer
Customer satisfaction with GreenSquare as their landlord
Satisfaction with outcome of last contact
Customer satisfaction with the quality of their home
Delivery
Rent lost due to homes being vacant as a percentage of the annual rent roll
Total units owned
Colleagues
Voluntary turnover
Engagement Index
Financial
Operating margin (RP only)
Group management cost per unit
2017/18 target
86%
90%
80%
2017/18 target
1%
11,865
2017/18 target
5-15%
75%
2017/18 target
28%
£1,037
Our key performance indicators (KPIs) provide a focus on those areas deemed most important to our performance. For example, our aim to achieve an absolute reduction in management costs and still improve customer satisfaction is monitored here.
21
How have we done – our performance 2016/17
Our KPIs and performance as at 7 April 2017The following table sets out the five key headline Group performance targets from our business plan that we have used as a past measure of our corporate success with staff.
Customer satisfaction with GreenSquare as their landlord
Customer satisfaction with the quality of their home
Rent lost due to homes being vacant as a percentage of the annual rent roll
Operating margin (RP only)
Group management cost per unit
Target
86%
79%
1.0%
25.0%
£1,077
2016/17
75%
78%
1.0%
28.6%
£1,053
22
GreenSquareGroup Ltd
GreenSquareCommunity
Housing
GreenSquareHomes Ltd
GreenSquareEstates Ltd
Registered provider Commercial company
GS EnergyServices Ltd
GreenSquareGroup Ltd
OxbodeHousing
AssociationLtd
GreenSquareCommunity
Housing
GreenSquareHomes Ltd
GreenSquareEstates Ltd
GreenSquareConstruction
Ltd
GreenSquareConstruction
Ltd
GS EnergyServices Ltd
WestleaHousing
AssociationLtd
WestleaHousing
AssociationLtd
Oxford CitizensHousing
AssocationLtd
Simplify the Group structure to reduce complexity, inefficiency and risk.The Group achieved the merger of two subsidiaries and the parent thus simplifying our group structure from the previous five registered providers in 2015...
Every penny counts
...to three registered providers with effect from October 2016.
Our business plan for 2016/17 also identified a number of goals and activities in relation to improving our value for money.
23
Achieve an absolute reduction in management cost per unit from £1,125 in 2015 to £1,077 by Q4 of 2016/17.A re-focus on core housing service staffing structures and changes in benefits, including the closure of all our defined benefit pension schemes and harmonisation of terms and conditions across the Group, have resulted in significant reductions in management costs. There has also been a review of our office provision resulting in the consolidation of our offices. One office was closed in Gloucester and major works were undertaken in our Chippenham office to enable us to move staff from our Swindon office so that can be vacated when the lease expires in 2018. Our Oxford office is also being marketed for disposal during 2017/18 as part of the review of service provision. The management cost target for 2016/17 was met.
Make a marked step towards becoming a ‘paperless’ organisation and increasing our own digital inclusion.2016/17 saw the first stages of our ‘digital transformation’ to drive down costs and improve service. This included the commencement of several major projects which will produce further efficiencies and improved effectiveness over the next few years including ‘paperless’ Board and Committee papers; a review of our purchase ledger with a view to implement a purchase to pay system; development of a self service portal for customer repairs and rent payment; and the first stages in the introduction of dynamic scheduling for responsive repairs. We have also increased our use of mobile devices and other technology which has led to a reduction in printing from 2.2m sheets in 2015 to 1.4m at the start of 2017. This also led to a £30K per annum reduction in our copier and printer costs.
Improve our approach to procurement to enable us to ‘buy better’.A strategic review of our procurement approach was launched in 2016/17 including the appointment of a procurement transformation lead for the duration of the project (12-18 months). Key areas identified are materials, fleet management and effective procurement of systems to support our digital transformation. This is alongside creating a wider shift in our culture and processes in relation to procurement and contract management to instil a long term change to effect greater value for money into the future.
Improve our performance on lettings, voids, rent arrears, year on year. Voids are loss of rent where there is empty property, due to either works being undertaken on the property; and/or there is no available tenant. Voids losses are an area of focus for the Group and a lean review was undertaken on the void process during 2016/17. This, combined with different methods of letting our hard to let properties has resulted in an improved performance for this year. Void rent loss for the year ended at 1.0% – exactly on the set target.
Some 55+ housing schemes remain difficult to let because they no longer reflect modern day living. We have undertaken a review of some schemes as part of our strategic asset review and have identified some schemes to be decommissioned over the next few years. In addition, we’re re-designing some schemes to increase flexibility and demand, such as reconfiguring bedsits into one bedroom flats.
Despite pressure from welfare reform changes, our 2016/17 total arrears across all tenure types have improved over the year. Year end total arrears performance at 5.8% is approaching the median and we compare well against a historical peer average of 6.5%. These arrears include amounts owed in housing benefit from local authorities.
0.50%
0.75%
1.00%
1.25%
1.50%
2013 2014 2015 2016 2017
Void losses %
Void losses
24
Growth with a purpose
Continue the strategic review of our assets. A stock profiling exercise provided us with additional asset information to inform our strategic asset review (SAR). This indicated that approximately 1% of our properties have a negative Net Present Value (NPV), with the Group average in the region of £34K.
The strategic disposals programme achieved our target during 2016/17. Our regeneration plans for some of our poorer performing assets also progressed. Work on a scheme at Culverhay through 2016/17 resulted in planning permission being granted in April 2017. This includes demolishing 65 older properties and replacing them with 109 new ones. We continue to look forward at the next steps and 2017/18 will see further work around stock profiling to inform our SAR and disposal programme.Increase the number of high quality homes available to meet the housing needs of our customers with a target of 200 retained units per annum.Overall unit numbers increased, albeit production for 2016/17 was below target at 128 new homes (2015/16: 227) at a cost of £18.5m (2015/16: £30.2m) and we invested a further £10.7m (2015/16: £10.2m) in capital work in progress on properties in our local community. The vast majority of these properties are at rent levels significantly below market levels, which creates a ‘social dividend’ as we are effectively investing in our local community. To address this shortfall and achieve our growth appetite we have, through the course of 2016/17, established a new operating model and structure in our development division. This has included the recruitment of a managing director to specifically focus on unit growth within the registered providers (RPs) as well as generating income through open market sales.
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
2013 2014 2015 2016 2017
Rent arrears %
Rent Arrears %
£200,000
£150,000
£100,000
£50,000
£-
-£50,000
-£100,000
NPV of net rent(excluding blocks, streets and leasehold)
11750
11700
11650
11600
11550
11500
11450
11400
11350
Mar
-15
Jun-
15
Sep-
15
Dec-1
5
Mar
-16
Jun-
16
Sep-
16
Dec-1
6
Mar
-17
Total units owned (excluding those managed for others)
25
Valuing our customers
To deliver a good quality core service to customers based on a clear set of service standards delivering top quartile levels of satisfaction (86%).This year has seen a decline in customer satisfaction. This is linked to a major organisational transformation that was implemented at the start of the financial year. Significant staff restructuring, aimed at delivering more efficient services into the future, unfortunately led to delays in some areas of our planned repairs.
We achieved full recruitment into the affected departments in Autumn 2016. Isolating performance over the period since that point shows an improving trend. We started the financial year 2016/17 with a monthly satisfaction rate of 80% in April and have recorded a overall satisfaction rate for April 2017 at 78% so we feel that we are on the road to recovering, and improving our satisfaction. We anticipate this trend improving as shown in the results below from October 2016 onwards and the Customer Service Committee has oversight on behalf of the Board.
95%
85%
75%
65%
55%
45%
35%
25%
April
May
June Ju
ly
Augus
t
Sept
embe
r
Octobe
r
Novem
ber
Decem
ber
Janu
ary
Febr
uary
Mar
chApr
il
Overall satisfaction 2017
95%
85%
75%
65%
55%
45%
35%
25%
Octobe
r
Novem
ber
Decem
ber
Janu
ary
Febr
uary
Mar
chApr
il
Overall satisfaction since October 2016
26
The trend is also mirrored in the steady process of recovering the repairs satisfaction in the last six months:
To ensure ongoing improvement, a lean review was conducted in property services during the course of the year and actions are now being implemented. This is alongside the digital projects previously outlined ie self service and dynamic repairs scheduling which are both aimed at providing an improved service around repairs – a key driver for satisfaction. GreenSquare also joined the Institute of Customer Service in late 2016 to inform the development of a new customer experience strategy. Improving customer satisfaction remains a key focus for 2017 and beyond.
Making a difference
Deliver community projects that effectively contribute to the growth and sustainment of thriving, resilient communities and improve overall customer satisfaction.We have worked in partnership with other agencies to deliver digital inclusion training in Wiltshire and Oxfordshire. This has been in preparation for the roll out of Universal Credit, as well as giving customers the confidence to access better value for money services with energy suppliers, for example.
We received £11,850 funding (£47,397 over a four year period) from the National Lottery, to fund the Rose Hill Project in Oxfordshire. The purpose of this is to increase resources and sustainability within the community as a whole, once the lottery funding ceases. Key projects last year include food recycling, a youth club with meals for those who attend, digital inclusion training and fitness classes for residents in the area.
We accessed joint funding of £6,000 from local authorities and parish councils to improve parking in an area in Wiltshire, following numerous customer complaints.
We secured £2,000 in funding from Wiltshire Council to run a community cohesion project.
We worked in partnership with other agencies in Oxfordshire in the delivery of community projects to improve community cohesion and the appearance of estates.
We have supported community projects in Gloucestershire, including the creation of a new residents’ association following consultation at a stakeholder meeting.
During 2016/17 we helped fund debt and advice agencies for customers to access a preferential service across our operating areas. This was a total investment of £74,000. Outcomes for customers during this year include £676,988 in benefit take up and debt advice provided for a total amount of £476,555. This is a return on investment of approximately £15 per £1 invested.
Our Supported Housing team works across a range of needs providing specialist accommodation and support directly, such as refuges and a mother and baby unit in
95%
85%
75%
65%
55%
45%
35%
25%
Octobe
r
Novem
ber
Decem
ber
Janu
ary
Febr
uary
Mar
chApr
il
Repairs satisfaction since October 2016
27
Wiltshire, or providing adapted accommodation, with other partners providing the support, such as for adults with learning difficulties across Oxfordshire. We also work in partnership with commissioning authorities such as Gloucestershire to provide community-based services providing specialist domestic abuse support and advice, and providing more general support for people at risk of homelessness. All our supported housing projects contribute to our business as well as delivering value to commissioners and local communities.
We provide additional staffing in our sheltered and extra care schemes for older people to help manage the facilities (such as communal lounges, laundries, gardens and activity rooms), and to help residents with finance and community integration issues and liaise with specialist care and support agencies.
This enables those residents to remain independent for longer, and move into schemes more easily, thus having a positive impact on our void periods and letting times, as well as improved outcomes for residents and linking them up with other local services.
Further understanding our performance: performance over time
We have also reviewed other key indicators, which demonstrate our value for money. They are:
• social housing margin;
• management and maintenance costs per unit;
• void losses; and
• cost of funds.
We have set out below our performance in each of these over the recent period.
Social Housing Margin (earnings before interest, tax and depreciation and amortisation – EBITDA)A good earnings margin is fundamental to ensuring the organisation is generating sufficient funds to enable it to invest in its operations going forward. The charts below show trends on our core social housing turnover and operating earnings (these exclude non-cash adjustments due to depreciation, impairment and pension provisions due to changes in accounting). They also exclude non social housing activities. A upward trend shows we are delivering better returns on investment.
25%
30%
35%
40%
2013 2014 2015 2016 2017
Social Housing EBITDA %
EBITDA % Group
0
20
40
60
80
100
2013 2014 2015 2016 2017
£ m
Social Housing Turnover and EBITDA £
Turnover Group EBITDA Group
28
Management cost per unitReduction in overall management costs remains central to our business plan. We continue to outperform our target.
The Board has set a five year corporate plan target based on a definition of management excluding the cost of managing repairs at £1,024 per unit by 2020.
Maintenance cost per unitIn the past few years we have carried out a full review of our investment strategy linked to our corporate plan. As a result significant additional investment was made to our homes relative to 2016. Maintenance costs include capitalised major repairs. Total maintenance cost per unit is now £1,664, close to the peer average of £1,667.
1,000
1,100
1,200
1,300
1,400
1,500
2015 2016 2017
Management cost per unit £
Management cost per unit
1,200
1,400
1,600
1,800
2015 2016 2017
Maintenance cost per unit £
Maintenance cost per unit
29
Cost of fundsOur cost of funds (eg interest costs) is relatively low. We have secured past funding at good rates which lower our overall cost of funding going forward. At the end of March 2017 the element of variable debt was approximately 28% of total drawn facilities. This takes some advantage of the relatively low interest rates currently available and provides certainty on past levels of fixed funding. All decisions are informed by our treasury strategy.
Understanding our current performance: benchmarking costs and income
To understand better our existing performance on costs we have looked at our absolute (ie published figures) and relative (ie how our costs compare with others) costs, through benchmarking.
Background on benchmarkingWe gain a fuller assessment of GreenSquare’s value for money performance by comparison to other similar sized registered providers. Consequently, a key focus for the value for money statement is how GreenSquare benchmarks against others.
One source of housing benchmarking data is HouseMark and we use the information they provide throughout the year to monitor our operating performance. At the year end, we obtain ‘Shape-Up’ analysis provided by Financial Services Management Development Ltd (FSMD). The financial benchmarking reports, provided by Shape-Up, are only available after the financial statements of our comparators have been published, therefore this analysis compares the results for year ended 31 March 2016 and then is rolled forward for the period ended 7 April 2017. The benchmarking in Shape-Up compares GreenSquare to a peer group of 43 similar housing association groups. Where there is similar analysis from HouseMark the benchmarking has shown a consistent story with the Shape-Up results.
4.10%
4.20%
4.30%
4.40%
4.50%
4.60%
2015 2016 2017
Cost of funds %
Cost of funds %
30
ResultsA selection of key benchmark data is summarised below:
For performance to date the following areas have been summarised:• growth;• revenue and cost structures;• operating surplus and interest;• bad debts and arrears;• financial indebtedness; and• HCA benchmarking.
GrowthIn 2016/17 asset growth was 6.3%. As per our corporate plan GreenSquare is using its financial resources to deliver new homes for those in housing need. The growth represents the increase in investment in work in progress and working capital.
Revenue and cost structuresIn the last year the Group has increased its total revenue per unit to £7,346, which is above benchmark in comparison to its peers. This includes capital sales and highlights the importance of increasing our revenue streams and the saving that GreenSquare creates for government when comparing rents paid by residents in receipt of housing benefit to the level of benefits that would be required to pay market rents in the private rented sector.
Our increased investment on maintenance and improvements means our maintenance cost per unit of £1,664 is consistent with our peers and the sector as a whole. Whilst financially this cost still demonstrates good value for money, it needs to be set in the context of the aim to improve benchmarks on resident satisfaction. This ‘cost versus satisfaction’ relationship delivers value for money as the Group has made a conscious decision to invest more in improving its assets.
Operating surplus and interestFollowing last year’s transition to FRS 102 the Statement of Financial Position records GreenSquare’s property assets at deemed cost which is based on a 2014 valuation. The impact of that is that the GreenSquare operating surplus is reduced because of a higher depreciation charge than if we had recorded our properties at their original historic cost. In order to benchmark consistently, if that difference was adjusted for then the operating margin (before interest and tax) is more consistent with the peer group average.We have taken advantage of historically low interest rates with our treasury strategy to fix approximately 72% of our portfolio and in 2016 arranged £20m from the government’s AHF programme at very advantageous rates which will provide funds for us to develop much-needed affordable rented homes.
Bad debts and arrearsWe continue to show good performance in this area, with the losses from bad debts as a percentage of gross rents and service charges in the best quartile and better than our peer group average of 0.6%.
GreenSquare2015
GreenSquare2016
GreenSquare2017
Average Peer Group 2016
Growth in asset value % 25.30% 0.20% 6.3% 3.0%
Total revenue per unit £ 6,845 6,987 7,346 6,968
Staff cost per FTE £* 32,969* 33,570* 33,719 38,178
Maintenance per unit £ 1,516 1,701 1,664 1,667
Operating margin % 22.3% 21.7% 26.6% 31.3%
Bad debt % 0.7% 0.7% 0.6% 0.6%
Total arrears % 5.3% 6.3% 5.8% 6.5%
Void losses % 1.0% 1.1% 1.0% 1.2%
Debt per unit £ 29,093 28,503 32,089 26,204
Interest cover ratio (including capitalised repairs) EBITDA MRI
1.92 1.85 2.04 2.21
* adjusted for restructuring and pension deficit transition
31
As shown earlier in the report, our 2016/17 total arrears across all tenure types decreased to 5.8% which compares well against our peers.
Financial indebtednessAs noted above in ‘Growth’, GreenSquare has a recent history of maximising the investment use of its property assets to help deliver its charitable objectives. Consequently the debt per unit is high compared to the peer average.
During 2016/17 as part of our Group amalgamation GreenSquare agreed changes to our lender covenants, primarily as a result of the introduction of FRS 102 and a desire to do more with the value of our assets.
A sector-wide interest cover ratio, which is regularly used by rating agencies and the HCA, is EBITDA MRI (Earnings before interest, tax and depreciation and other non-cash adjustments less capitalised repairs divided by interest). GreenSquare has improved this ratio over the past few years and is moving towards the historic peer group benchmark average.
Our financial performance has meant we have met lenders’ covenants and the Board expects to remain compliant in the foreseeable future.
HCA benchmarkingThe HCA recently issued new value for money headline unit cost indicators as part of its assurance and self assessment framework. As set out in this note, the Board considers both management cost and total maintenance cost per unit as key measures for understanding our comparative performance and has been monitoring and setting challenging targets as part of delivering the best use of our resources.
This conforms with the HCA VFM Standard requirement that set out the absolute and comparative costs of delivering specific services, published in July 2016.
The Group is participating in the pilot of the Sector Scorecard during 2017/18 to further inform our approach into 2018 and beyond.
The chart below presents these key financial ratios for the Group with a comparison to the latest sector averages taken from the published HCA 2016 Global Accounts analysis.
SummaryOur financial results compare favourably in many areas to our peer group and show a positive outcome from a focus on value for money. In financial terms, the Board made a conscious decision as part of its strategic asset review to fund higher capital maintenance so that we can regenerate and create value invested in new homes and communities.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
GreenSquare Group14/15
GreenSquare Group15/16
GreenSquare Group16/17
Average Peer Group15/16
£
Social housing cost per unit (CPU)
Management CPU Service charge
Major repair CPU Other SH costs CPU
Maintenance CPU
32
Risks and uncertainties
The main risks that may prevent the Group achieving its objectives are considered and reviewed quarterly by the senior management team and Board as part of the corporate planning processes. The risks are recorded and assessed in terms of their impact and probability. Major risks, presenting the greatest threats to the Group, are reported to the Group Audit Committee together with action taken to manage the risks and the outcome of the action. These risk reports include assessments of key controls used to manage the risks. The major risks to successful achievement of the Group’s objectives are considered below.
Key risk
Increase in rent arrears
As a result of the recent welfare reform changes and with further changes planned, it is inevitable that we will see an increase in arrears.
Action being taken
• A lean review is planned, which will lead to system and process improvements.
• Resources have been increased in customer accounts team.
• We will continue to fund local debt and advice agencies.
• Our new build rents will be capped at LHA levels.
• We will continue to work with the NHF to influence the DWP on future changes.
Key risk
Local Government Pension Scheme deficit crystallises or rise in defined benefit pension scheme contributions become unaffordable
The Group could face significant liabilities for meeting pension fund deficits. The Group’s contributions to the fund may need to increase significantly in order to fund the scheme.
Action being taken
• Closure of defined benefit and future accruals to existing members as from 31 March 2016.
• Exposure regularly monitored through review of valuations and option appraisal project with actuarial professionals.
• Flexible benefit packages to ensure maximum value for money achieved through remuneration of key staff
33
Key risk
Failure to implement agreed efficiency measures
Delivery of our strategic cost savings target, which was set in December 2015, whilst in a climate of other cost pressures will be challenging to achieve.
Action being taken
• Our budget and financial plan include the targets that we have set to be achieved by 2020, which are regularly reviewed.
• Our year on year performance against target is regularly reviewed and reported to Board.
• We have a programme of lean reviews being undertaken to deliver operational and financial improvements.
• We have initiated a project to transform our procurement approach and processes.
• We will continually review our operational and financial performance, including utilising benchmarking analysis.
Risks and uncertainties cont’d
Key risk
Failure to deliver the planned surplus from asset disposals
The Group undertook a strategic asset review (SAR) in 2016. This identified a volume of asset disposals and a regeneration plan was created for some of its poorer performing assets. Success depends on achieving the greatest return on our assets in a challenging economic environment.
Action being taken
• Our disposal panel reviews all strategic asset disposals to ensure that they meet the criteria set.
• Our Homes and Spaces Collaborative Management Team reviews the regeneration plans to ensure that they meet the criteria set.
• We have plans to further improve our stock profiling process during 2018 to support our SAR.
• Improved marketing techniques for disposals.
Key risk
Net cost of development higher than planned within agreed standards or development programme not delivered on time
Successful delivery of the programme depends on continued support from the HCA for the Group, as well as the ability and willingness of development contractors to continue to build our schemes in a challenging economic environment.
Action being taken
• Maintaining regular contact with the HCA on the development programme.
• Enhancing credit checks on new contractors and re-assessing existing contractors.
• Monitoring progress of schemes under development, with regular meetings with contractors.
34
Risks and uncertainties cont’d
Key risk
Failure to achieve the GreenSquare Homes business plan
GreenSquare Homes business plan includes a development programme of open market and s106 sales. Success depends on demand for the properties, sustainable house prices and managing construction costs. A fall in house prices would have a significant impact on the planned surplus.
Action being taken
• Continual review of planned developments.
• Monitoring of our operational and financial performance, with regular reporting to our Development Committee.
• Continual monitoring of sales activity to provide an early warning mechanism.
• Re-appraising planned schemes to offer alternative forms of tenure ie reverting to market rent.
• Improved marketing techniques.
Key risk
Failure to achieve planned surplus from first tranche and staircasing of low cost home ownership sales
The Group’s development programme includes low cost home ownership. Success depends on demand for the properties, sustainable house prices and managing construction costs. Low demand in the housing market generally has an impact on low cost home ownership schemes.
Action being taken
• Continual review of planned developments. Removing potential low cost home ownership schemes where these may be slow to sell.
• Monitoring of our operational and financial performance, with regular reporting to our Development Committee.
• Continual monitoring of sales activity to provide an early warning mechanism.
• Re-appraising planned schemes to offer alternative forms of tenure.
• Improved marketing techniques.
Key risk
Failure to understand and respond to changes in external markets and operating environments
The continued restraints on government spending, welfare benefit reform and rent policy changes have been identified as key risks to the Group. Such changes are likely to impact on the Group’s ability to deliver its planned development programme and may affect core activities.
Action being taken
• Regular review of business plan including ‘destructive stress testing’ to ensure that the Group has adequate resources to deliver committed activities and development.
• Welfare reform pilot area.
• Monitoring rental arrears and working closely with tenants to recover these on a timely basis.
• Reviewing our cost base to identify cost savings where possible.
35
Risks and uncertainties cont’d
Key risk
Loss of key staff
Retention of quality staff and managers is key to successful delivery of our business plan.
Action being taken
• Staff development programme, including regular performance appraisals, implemented and monitored.
• Staff satisfaction survey carried out annually.
36
Financial position
The consolidated statement of comprehensive income and statement of financial position are summarised on page 12 and the following paragraphs highlight key features of the Group’s financial position at 7 April 2017:
Accounting policiesThe Group and Association’s principal accounting policies are set out on pages 46 to 52 of the financial statements. The policies that are most critical to the financial results relate to accounting for housing properties and capital grants, pension costs and financial instruments and include: capitalisation of interest and development administration costs; housing property depreciation; and treatment of shared ownership properties.
Housing propertiesAt 7 April 2017 the Group owned and managed 11,685 housing properties (2016: 11,998).
Housing properties are carried at deemed cost in the statement of financial position at £668.8m (2016: £657.7m).
The Group reviewed and revised the estimated useful life of property structure with effect from 1 April 2016. The revisions were accounted for prospectively as a change in accounting estimates and as a result, the depreciation charges of the Group for the current financial period have been decreased by £2.2m and for the Association £0.8m.
Our investment in housing properties this year was funded through a mixture of social housing grant, loan finance and working capital where we continue to show a strong current asset balance. The Group’s treasury management arrangements are considered below.
Pension costsThe Group and Association participates in one pension scheme; the Social Housing Pension Scheme (SHPS). The SHPS final salary and Career Average Related Earnings (CARE) scheme were closed to all members and future accruals on the 31 March 2016.
Membership and auto enrolment for all employees is now only available in the SHPS defined contribution scheme.
The Group has contributed to the schemes in accordance with the levels set by the actuaries of between 2.0% and 6.0% for SHPS plus annual monetary deficits.
One subsidiary, Westlea, participated in the Wiltshire County Council Pension Scheme (WCCPS) and the Pension Trust’s Growth Plan (PTGP). The WCCPS was a final salary scheme and was closed to new members and future accruals on 31 March 2016. The PTGP was an additional voluntary contribution (AVC) scheme and had no employer contributions. In compliance with section 75 of the Pensions Act 1995 the scheme actuary calculated the employer debt on withdrawal and in accordance with the Occupational Pension Schemes (Employer Debt) Regulations 2005 (as amended) and Statutory Instrument 2008/731 full settlement of any PTGP employer debt was made in September 2016.
37
The Association participated in the Oxfordshire County Council Pension Fund (OCCPF), a multi-employer scheme with more than one participating employer. The Association had a pass through agreement with the local authority and was therefore not responsible for any past service deficit in respect of the active, deferred or pensioner members. On withdrawal no future contributions are payable so the net liability in respect of past service is zero. The scheme closed on 31 March 2016 and any members transferred to the defined contribution scheme.
Capital structure and treasury policyWe adopt a conservative approach to treasury management. No standalone derivatives are used and the Board seeks independent advice from external consultants along with quarterly reports from officers on treasury and investment performance.
As at 7 April 2017 the Group had drawn loans amounting to £375m, an increase of £34m on the previous year which are used to continue to develop general family housing. Of this, 71.5% of debt was fixed at an average interest rate of 4.4%, with the remaining floating debt at an average interest rate of 2.1%. Total interest costs for the Group before capitalisation were £15.7m for the year (2016: £14.6m).
The Group aims to fix at least 60% of its debt, with maturities spread over the medium term. The Group borrows and lends only in sterling and is not exposed to currency risk.
The Group’s lending agreements require compliance with a number of financial and non-financial covenants.
The Group’s position is monitored on an ongoing basis and reported to the Board each quarter. Our financial performance has meant we have met lenders’ covenants and the Board expects to remain compliant in the foreseeable future.
CashflowsThe Group has achieved a net cash increase during the year of £37.6m (2016: increase £2.5m) and the cash inflows and outflows are shown in the Group statement of cash flows (page 45).
At the year end, the Group’s current assets included £74.4m (2016: £36.8m) in liquid funds (cash at bank including overnight money market).
Future developmentsAs expressed in our corporate plan, we will continue to reinvest in our existing property, based upon an asset management strategy. We will also continue to develop the housing stock to further meet housing need in our areas of operation.
A key influence on the timing of borrowings is the rate at which development activity takes place. The Board has approved plans to spend £59m during the next financial year to develop general needs and shared ownership accommodation in the Group area.
The above commitments will be financed primarily through new funding, property sales (£5m) and internal cash balances.
The Group continues to assess the impact of government policy on its business plan and intended
future developments. The Group’s resources are only committed to a scheme once funding has been secured. Other initiatives will be developed over the next year to assist our tenants in dealing with changes to housing and other benefits.
Statement of complianceIn preparing this strategic report and Board report, the Board has followed the principles set out in the Statement of Recommended Practice (SORP) for Registered Social Housing Providers 2014.
Howard ToplisChief Executive27 June 2017
38
Independent auditor’s report to the members of GreenSquare Group Limited
OpinionWe have audited the financial statements of GreenSquare Group Limited (the ‘parent Association’) and its subsidiaries (the ‘Group’) for the period ended 7 April 2017 which comprise the consolidated and Association statement of comprehensive income, the consolidated and Association statement of financial position, the consolidated and Association statement of changes in reserves, the consolidated statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements: • give a true and fair view of the state of the Group’s
and parent Association’s affairs as at 7 April 2017 and of the Group’s and parent Association’s surplus for the period then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2015.
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Association in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concernWe have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the board members’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the board members have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or the parent Association’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other informationThe board members are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do
39
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information, including the chair’s statement, the report of the board and the strategic report and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where we are required to report to you if, in our opinion:
• the information given in the report of the board for the financial period for which the financial statements are prepared is not consistent with the financial statements;
• adequate accounting records have not been kept by the parent Association; or
• a satisfactory system of control has not been maintained over transactions; or
• the parent Association financial statements are not in agreement with the accounting records and returns; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the boardAs explained more fully in the statement of board member responsibilities, the board members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the board members determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the board members are responsible for assessing the Group’s and the parent Association’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board members either intend to liquidate the Group or the parent Association or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statementsThis report is made solely to the Association’s members, as a body, in accordance with the Housing and Regeneration Act 2008 and Section 87 of the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Association and the Association’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
BDO LLP, statutory auditorGatwick, West Sussex, United Kingdom14 July 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
40
Consolidated statement of comprehensive incomeFor the period ended 7 April 2017.
Note2017£’000
2016£’000
Turnover 3 85,838 83,826
Operating expenditure 3 (62,984) (65,635)
Operating surplus 3,6 22,854 18,191
Gain on disposal of fixed assets 7 3,531 1,826
Interest receivable and other income 8 170 164
Interest and financing costs 9 (15,233) (13,827)
Movement in fair value of financial instruments 92 87
Other finance charges 26(a) (226) (349)
Surplus before tax 11,188 6,092
Taxation 12 (373) (394)
Surplus for the financial year 10,815 5,698
Unrealised surplus on revaluation of investment properties 14 1,737 –
Actuarial (loss)/gain in respect of pension schemes 26(a)(b) (1,962) 1,725
Total comprehensive income for the year 10,590 7,423
41
Association statement of comprehensive incomeFor the period ended 7 April 2017.
The financial statements were approved by the Board on 27 June 2017 and signed on its behalf by:
H GardnerChair
C Victory-RoweVice Chair
M ArnoldCompany Secretary
The Association’s results relate wholly to continuing activities. The accompanying notes form part of these financial statements.
Note2017£’000
2016£’000
Turnover 3 33,209 24,805
Operating expenditure 3 (23,616) (19,797)
Operating surplus 3,6 9,593 5,008
Gain on disposal of fixed assets 7 740 332
Interest receivable and other income 8 123 86
Interest and financing costs 9 (5,166) (3,447)
Movement in fair value of financial instruments 92 87
Other finance charges – (74)
Gift aid receivable (850) 1,250
Surplus before tax 4,532 3,242
Taxation – –
4,532 3,242
Actuarial loss in respect of pension schemes (110) –
Total comprehensive income for the year 4,422 3,242
42
Consolidated and Association statement of changes in reservesFor the period ended 7 April 2017.
The accompanying notes form part of these financial statements.
GroupRevaluation
Reserve£’000
RestrictedReserve
£’000
RevenueReserve*
£’000
Total£’000
As at 31 March 2015 284,334 36 49,479 333,849
Comprehensive income – – 7,423 7,423
Revaluation adjustments (16) – – (16)
Transfers – (2) 2 –
Transfer from revaluation reserve to revenue reserve (3,516) – 3,516 –
As at 31 March 2016 280,802 34 60,420 341,256
Comprehensive income 1,737 – 8,853 10,590
Revaluation adjustments (370) – 415 45
Transfers – (3) 3 –
Transfer from revaluation reserve to revenue reserve (4,941) – 4,941 –
As at 7 April 2017 277,228 31 74,632 351,891
AssociationRevaluation
Reserve£’000
RestrictedReserve
£’000
RevenueReserve*
£’000
Total£’000
As at 31 March 2015 113,764 36 41,573 155,373
Comprehensive income – – 3,242 3,242
Revaluation adjustments (16) – – (16)
Transfers – (2) 2 –
Transfer from revaluation reserve to revenue reserve (1,504) – 1,504 –
As at 31 March 2016 112,244 34 46,321 158,599
Comprehensive income – – 4,422 4,422
Revaluation adjustments 45 – – 45
Transfers – (3) 3 –
Transfer from revaluation reserve to revenue reserve (1,350) – 1,350 –
As at 7 April 2017 110,939 31 52,096 163,066* Included in the Revenue Reserve is £6,392
(2016:£31,679) of BIG Lottery Restricted Funding
43
Consolidated statement of financial positionAt 7 April 2017.
The financial statements were approved by the Board on 27 June 2017 and signed on its behalf by:
H GardnerChair
C Victory-RoweVice Chair
M ArnoldCompany Secretary
The accompanying notes form part of these financial statements.
Note2017£’000
2016£’000
Intangible fixed assets
Goodwill 32 – 130
Tangible fixed assets
Housing properties 13 668,841 657,672
Investment properties 14 6,923 5,191
Other tangible fixed assets 15 7,823 8,074
683,587 671,067
Current assets
Stock and properties held for sale 17 11,729 15,099
Trade and other debtors 18 5,537 6,954
Asset held for resale – 2
Investments 19 537 487
Cash at bank and in hand 74,431 36,849
92,234 59,391
Creditors: amounts falling due within one year 20 (22,443) (16,521)
Net current assets 69,791 42,870
Total assets less current liabilities 753,378 713,937
Creditors: amounts falling due after more than one year 21 (387,312) (359,144)
Provisions for liabilities 27 (5,765) (6,619)
Net pension liability 26(a) (8,410) (6,918)
Total Net Assets 351,891 341,256
Capital and reserves
Non-equity share capital 28 – –
Restricted reserve 31 34
Revaluation reserve 277,228 280,802
Income and Expenditure Reserve 74,632 60,420
Total reserves 351,891 341,256
44
Association statement of financial positionAt 7 April 2017.
The financial statements were approved by the Board on 27 June 2017 and signed on its behalf by:
H GardnerChair
C Victory-RoweVice Chair
M ArnoldCompany Secretary
The accompanying notes form part of these financial statements.
Note2017£’000
2016£’000
Tangible fixed assets
Housing properties 13 249,369 237,552
Investment properties 14 6,923 –
Other tangible fixed assets 15 3,956 4,503
Investments in subsidiaries 16 3,315 3,315
263,563 245,370
Current assets
Stock and properties held for sale 17 6,136 9,774
Trade and other debtors 18 1,991 3,668
Investments 19 537 487
Cash at bank and in hand 38,198 15,150
46,862 29,079
Creditors: amounts falling due within one year 20 (6,773) (7,238)
Net current assets 40,089 21,841
Total assets less current liabilities 303,652 267,211
Creditors: amounts falling due after more than one year 21 (137,298) (104,711)
Provisions for liabilities 27 (3,288) (3,901)
Total net assets 163,066 158,599
Capital and reserves
Non-equity share capital 28 – –
Restricted reserve 31 34
Revaluation reserve 110,939 112,244
Revenue reserve 52,096 46,321
Total reserves 163,066 158,599
45
Consolidated statement of cash flowsFor the period ended 7 April 2017.
Note2017£’000
2016£’000
Net cash generated from operating activities 30 38,503 28,116
Cash flow from investing activities
Interest received and similar income 170 173
Purchase and refurbishment of tangible fixed assets (24,259) (21,356)
Payments to acquire other tangible fixed assets (1,257) (2,548)
Receipts from sales of tangible fixed assets 7,631 13,166
Payments to acquire investments (142) (1,004)
Receipts from sales of investments 142 58
Receipt of government grants 955 548
(16,760) (10,963)
Cash flow from financing activities
Interest paid (14,836) (14,446)
Corporation Tax paid (565) (290)
New long term loans 34,000 5,893
Repayment of long term loans (2,760) (5,763)
15,839 (14,606)
Net change in cash and cash equivalents 37,582 2,547
Cash and cash equivalents at beginning of the year 36,849 34,302
Cash and cash equivalents at 7 April 2017 74,431 36,849
46
Notes to the financial statements7 April 2017.
1. Legal status
The Association is registered under the Co-operative and Community Benefit Societies Act 2014 and is a registered housing provider in England.
2. Accounting policies
Basis of accounting
The financial statements of the Group and Association are prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) including Financial Reporting Standard 102 (FRS102) and the Housing SORP 2014: Statement of Recommended Practice for Registered Social Housing Providers and comply with the Accounting Direction for Private Registered Providers of Social Housing 2015. The Board is satisfied that the current accounting policies are the most appropriate for the Group and Association.
Basis of consolidation
On 7 October 2016 three of the Group’s main registered societies – GreenSquare Group Ltd, Oxford Citizens Housing Association Limited (OCHA) and Oxbode Housing Association Limited (Oxbode) – formally merged under section 109 of the Co-operative and Community Benefit Societies Act 2014. The new GreenSquare Group Limited being the newly formed parent company under which the merged organisations and Group would operate. The comparatives for the consolidated numbers are the results and position as at 31 March 2016 that were disclosed in the GreenSquare Group Limited financial statements for that year. In substance the Group is unchanged.
The merger has been accounted for using the merger accounting principles set out in Financial Reporting Standard 6. Accordingly, the financial information for the current and comparative periods has been presented as if the entities had been merged throughout these periods.
The Association is required by statute to prepare Group accounts.
The consolidated financial statements incorporate the financial statements of all members of the Group as at 7 April 2017 using merger and acquisition accounting where appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group balances and transactions, including unrealised profits, have been eliminated on consolidation.
Going concern
The Group’s business activities, its current financial position and factors likely to affect its future development are set out within the strategic report. The Group has in place long-term debt facilities, which provide adequate resources to finance committed reinvestment and development programmes, along with the Group’s day to day operations. The Group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders’ covenants.
47
On this basis, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months after the date on which the report and financial statements are signed. For this reason, it continues to adopt the going concern basis in the financial statements.
Significant judgements and estimates
Preparation of the financial statements requires management to make significant judgements and estimates. The items in the financial statements where these judgments and estimates have been made include:
Significant management judgementsThe following are the significant management judgements made in applying the accounting policies of the Group that have the most significant effect on the financial statements.
Housing properties in tangible fixed assets are valued at deemed cost as at 1 April 2014.
The Group and Association has taken advantage of transitional relief set out in FRS102 for deemed costs and treated all grant on transition under the performance model with subsequent grants under the accrual model.
ImpairmentAs part of the Group’s continuous review of the performance of its assets, management identify any homes, or schemes, that have increasing void losses, are impacted by policy changes or where the decision has been made to dispose of the properties. These factors are considering to be an indication of impairment.
Where there is evidence of impairment, the fixed assets are written down to the recoverable amount and any impairment losses are charged to operating surpluses.
As a result, we estimated the recoverable amount of its housing properties as follows:
a) determined the level at which recoverable amount is to be assessed (ie the asset level or cash generating unit (CGU) level). The CGU level was determined to be an individual scheme;
b) estimated the recoverable amount of the cash-generating unit;
c) calculated the carrying amount of the cash-generating unit; and
d) compared the carrying amount to the recoverable amount to determine if an impairment loss has occurred.
Based on this assessment, we calculated the Depreciated Replacement Cost (DRC) of each social housing property scheme, using appropriate construction costs and land prices. Comparing this to the carrying amount of each scheme, we do not consider there to be an impairment charge against social housing assets.
Financial instrumentsThe Group has reviewed its loan agreements and classified all loans as ‘Basic’ financial instruments. We consider any fixed rate debt with two-way early redemption indemnity clauses to be held for the long term as per treasury strategy and be non speculative. In addition the commercial substance of the transaction is neutral to the lender such that should a prepayment event occur the full principal and interest will be due and no economic benefit will accrue to the Association. This satisfies the ‘Basic’ requirements as set out in Paragraph 11.9 of FRS 102. As at 7 April 2017 the value of embedded interest rate hedges with a positive mark to market value was £nil (2016 £nil).
Capitalisation of property development costsDistinguishing the point at which a project is more likely than not to continue, allowing capitalisation of associated development costs requires judgement. After capitalisation management monitors the asset and considers whether changes indicate that impairment is required.
48
Supporting People Management judgement is applied in determining the extent to which the risks and benefits are transferred to the Association when considering the income to be recognised. £2.3m of Supporting People income was recognised in the year.
Estimation uncertaintyInformation about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.
Useful lives of depreciable assetsManagement reviews its estimate of the useful lives of depreciable assets at each reporting date based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment and changes to decent homes standards which may require more frequent replacement of key components. Group accumulated depreciation at 7 April 2017 was £60.1m. Defined benefit obligation (DBO)Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses (as analysed in Note 26). The liability at 7 April 2017 was £14.0m.
Fair value measurementManagement uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) including land, properties developed for outright sale, trade debtors and investment properties. This involves developing estimates and assumptions consistent with how market participants would price the instrument or asset. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices.
Turnover
Turnover comprises rental and service charge income receivable in the year, income from shared ownership first tranche sales, sales of properties built for sale and other services included at the invoiced value (excluding VAT) of goods and services supplied in the year and revenue grants receivable in the year.
Revenue recognition
Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting after deducting voids. Income from first tranche sales and sales of properties built for sale is recognised at the point of legal completion of the sale. Revenue grants are receivable when the conditions for receipt of agreed grant funding have been met. Charges for support services funded under Supporting People are recognised as they fall due under the contractual arrangements with administering authorities. Gas servicing income
is recognised on the basis of work performed and the relevant company’s reasonable certainty that it is entitled to receive revenues.
Interest payable
Interest is capitalised on borrowings to finance developments to the extent that it accrues in respect of the period of development if it represents either:
a) interest on borrowings specifically financing the development programme after deduction of interest on social housing grant (SHG) in advance; or
b) interest on borrowings of the Group as a whole after deduction of interest on SHG in advance to the extent that they can be deemed to be financing the development programme.
Other interest payable is charged to the income and expenditure account in the year.
Taxation
The Association is accepted as a charity by HM Revenue and Customs (HMRC). Income and capital gains of the Association are generally exempt from tax if applied for charitable purposes.
49
Deferred taxation
Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is reversed.
Deferred tax is recognised when income or expenses from a subsidiary or associate have been recognised, and will be assessed for tax in a future period, except where:
– the Group is able to control the reversal of the timing difference; and
– it is probable that the timing difference will not reverse in the foreseeable future.
A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and liabilities that are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of deferred tax recognised.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Value added tax
The Group charges VAT on some of its income and is able to recover part of the VAT it incurs on expenditure. The financial statements include VAT to the extent that it is suffered by the Group and is not recoverable from HM Customs and Excise. The balance of VAT payable or recoverable at the year end is included as a current liability or asset.
Pensions
The Group previously participated in two funded multi-employer defined benefit schemes, SHPS and the WCCPF. Both schemes were closed on 31 March 2016 and members transferred to a SHPS defined contribution scheme.
For the SHPS, it has not been possible to identify the share of underlying assets and liabilities belonging to individual participating employers. The income and expenditure charge represents the employer contributions payable to the scheme for the accounting period.
Contributions payable from the Association to SHPS under the terms of its funding agreement for past deficits are recognised as a liability in the Association’s financial statements.
For the WCCPF, scheme assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit credit method and are discounted at appropriate high quality corporate bond rates. The net surplus or deficit is presented separately
from other net assets on the statement of financial position. A net surplus is recognised only to the extent that it is recoverable by the Group through reduced contributions or through refunds from the plan.
Lump sum payments are being made to reduce the deficits in schemes closed to new entrants. Past service costs are recognised in the current reporting period. Interest is calculated on the net defined benefit liability. Re-measurements are reported in other comprehensive income.
Supported housing managed by agencies
Social housing capital grants are claimed by the Group as developer and owner of the property and included in the balance sheet of the Group. The treatment of other income and expenditure in respect of supported housing projects depends on the nature of the partnership arrangements between the Group and its managing agents and on whether the Group carries the financial risk.
Where the Group holds the support contract with the Supporting People Administering Authority and carries the financial risk, all the project’s income and expenditure is included in the Group’s income and expenditure account.
Where the agency holds the support contract with the Supporting People Administering Authority and carries the financial risk, the income and expenditure account includes only that income and expenditure which relates solely to the Group.
50
Goodwill
Goodwill being the excess over the fair value of the underlying separable net assets acquired in a business combination and is capitalised as an intangible fixed asset.
Goodwill is amortised to the income and expenditure account on a straight line basis over an expected useful economic life of 10 years.
Housing properties
Housing properties are properties held for the provision of social housing or to otherwise provide social benefit. Housing properties are principally properties available for rent and are stated at cost less accumulated depreciation and impairment losses. Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development period.
Works to existing properties which replace a component that has been treated separately for depreciation purposes, along with those works that result in an increase in net rental income over the lives of the properties, thereby enhancing the economic benefits of the assets, are capitalised as improvements.
Shared ownership properties are split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover and the remaining element is classed as a fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment.
Donated land
Land donated by local authorities and others is added to cost at the market value of the land at the time of the donation. Where the land is not related to a specific development and is donated by a public body an amount equivalent to the increase in value between market value and cost is added to other grants. Where the donation is from a non-public source, the value of the donation is included as income.
Government grants
Government grants include grants receivable from the HCA, local authorities, and other government organisations. Government grants received for housing properties are recognised in income over the useful life of the housing property structure under the accruals model.
Grants relating to revenue are recognised in income and expenditure over the same period as the expenditure to which they relate once reasonable assurance has been gained that the entity will comply with the conditions and that the funds will be received.
Grants due from government organisations or received in advance are included as current assets or liabilities.
Deemed cost transitional relief
The Association has taken advantage of transitional relief for deemed cost and treated all grants received for housing properties on transition under the performance model with subsequent grant under the accrual model.Government grants received for housing properties are
subordinated to the repayment of loans by agreement with the HCA. Government grants released on sale of a property may be repayable but are normally available to be recycled and are credited to a Recycled Capital Grant Fund and included in the statement of financial position in creditors.
If there is no requirement to recycle or repay the grant on disposal of the asset, any unamortised grant remaining within creditors is released and recognised as income in income and expenditure.
Other grants
Grants received from non-government sources are recognised using the performance model. A grant which does not impose specified future performance conditions is recognised as revenue when the grant proceeds are received or receivable. A grant that imposes specified future performance-related conditions on the Association is recognised only when these conditions are met. A grant received before the revenue recognition criteria are satisfied is recognised as a liability.
Depreciation of social housing properties
The Group separately identifies the major components which comprise its housing properties, and charges depreciation, so as to write down the cost of each component to its estimated residual value, on a straight line basis, over its estimated useful economic life.
The Group reviewed and revised the estimated useful life of property structure with effect from 1 April 2016. The revisions were accounted for prospectively as a change in accounting estimates and as a result, the depreciation
51
charges of the Group for the current financial period have been decreased by £2.2m and for the Association £0.8m.
The Group depreciates the major components of its housing properties at the following annual rates:
Structure 125 yearsRoofs 60 yearsKitchens 20 yearsBathrooms 30 yearsWindows 25 yearsHeating 15 years
Freehold land is not depreciated.
Properties held on leases are amortised over the life of the lease or their estimated useful economic lives in the business, if shorter.
Impairment
Annually housing properties are assessed for impairment indicators. Where indicators are identified an assessment for impairment is undertaken comparing the scheme’s carrying amount to its recoverable amount. Where the carrying amount of a scheme is deemed to exceed its recoverable amount, the scheme is written down to its recoverable amount. The resulting impairment loss is recognised as operating expenditure. Where a scheme is currently deemed not to be providing service potential to the association, its recoverable amount is its fair value less costs to sell.
Other tangible fixed assets
Depreciation is provided evenly on the cost of other tangible fixed assets to write them down to their estimated residual values over their expected useful lives. No depreciation is provided on freehold land. The principal annual rates used for other assets are:
Freehold office buildings 50-75 yearsFurniture, fixtures and fittings 5-10 yearsComputers and office equipment 3-5 yearsMotor vehicles 5-7 years
Gains or losses arising on the disposal of other tangible fixed assets are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised as part of the surplus/deficit for the year.
Investment properties
Investment properties consist of commercial properties and other properties not held for the social benefit or for use in the business. Investment properties are measured at cost on initial recognition and subsequently at fair value as at the year end, with changes in fair value recognised in income and expenditure.
Leased assets
Where the Group enters into a lease or leaseback which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a finance lease. Assets held under finance leases are included in the balance sheet and depreciated in accordance with the Group’s normal accounting policies. The present value of future rentals is shown as a loan liability. The interest element of rental obligations is charged to the income and expenditure account over the period of the lease in proportion to the balance of capital repayments outstanding.
Rentals payable under operating leases are charged to the income and expenditure account on a straight line basis over the lease term.
Financial instruments
Financial instruments which meet the criteria of a basic financial instrument as defined in Section 11 of FRS 102 are accounted for under an amortised historic cost model.
Basic financial instruments are recognised at amortised historical cost.
Non-basic financial instruments are recognised at fair value using a valuation technique with any gains or losses being reported in surplus or deficit. At each year end, the instruments are revalued to fair value, with the movements posted to the income and expenditure account (unless hedge accounting is applied).
52
The Group and Association have not adopted hedge accounting for the financial instruments.
Current asset investments
Investments are stated at market value. Any revaluation of investments is reflected in the changes in reserves. Diminutions beyond the level of the revaluation reserve for investments are charged to the statement of comprehensive income.
Liquid resources
Liquid resources are readily disposable current asset investments. They include some money market deposits, held for more than 24 hours, that can only be withdrawn without penalty on maturity or by giving notice of more than one working day.
Stock and properties for sale
Stocks comprise shared ownership first tranche sales, completed properties for outright sale, property under construction and raw materials and consumables and are valued at the lower of cost and net realisable value. Cost comprises materials, direct labour and direct development overheads. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal.
Long term contracts
The amount of long-term contracts, at costs incurred, net of amounts transferred to cost of sales, after deducting foreseeable losses and payments on account not matched with turnover, is included in work in progress and stock as long-term contract balances. The amount by which recorded turnover is in excess of payments on account is included in debtors as amounts recoverable on long-term contracts. Payments in excess of recorded turnover and long-term contract balances are included in creditors as payments received on account on long-term contracts.
Gift aid
The parent entity recognises gift aid income within income when a gift aid payment is agreed as due. The exact amount is however agreed post year end once the results of the specific subsidiary are agreed.
Provisions for liabilities
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value using a pre-tax discount rate. The unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.
The Group recognises a provision for annual leave accrued by employees as a result of services rendered in the current period, and which employees are entitled to carry forward and use within the next 12 months. The provision is measured at the salary cost payable for the period of absence.
Reserves
The Group establishes restricted reserves for specific purposes where their use is subject to external restrictions and designated reserves where their reserves are earmarked for a particular purpose.
Hunts Close reserveFollowing the transfer of the assets and liabilities from Oxfordshire Charitable Housing Trust, the Group set up a restricted reserve to fund extra repairs, improvements and an element of service charges in relation to properties at Hunts Close.
Revaluation reserveThe difference on transition between the fair value of social housing properties and the historical cost carrying value is credited to the revaluation reserve.
53
Group
2017 2016
Turnover Cost of salesOperating
costs
Operating surplus/(deficit)
Turnover Cost of salesOperating
costs
Operating surplus/(deficit)
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Social housing lettings (Note 4) 63,494 – (41,015) 22,479 60,212 – (43,915) 16,297
Other social housing activities
Development services 31 – – 31 23 – – 23
Supporting People contract income 2,284 – (2,093) 191 2,730 – (2,649) 81
Development costs not capitalised – – (1,439) (1,439) – – (730) (730)
First tranche shared ownership sales 4,376 (3,593) – 783 3,037 (2,300) – 737
BIG lottery fund –restricted funds 45 – (77) (32) 77 – (68) 9
SHPS Tier 4 past service deficit re-measurement see note 26(b) – – – – – – (1,687) (1,687)
Other 201 – (5) 196 147 – (12) 135
6,937 (3,593) (3,614) (270) 6,014 (2,300) (5,146) (1,432)
Non social housing activities
Market rent lettings and other commercial initiatives 326 – (131) 195 315 – (190) 125
Student accommodation lettings 128 – (175) (47) 121 – (159) (38)
Development for sale 10,679 (10,174) – 505 13,995 (10,407) – 3,588
Gas servicing 3,916 – (4,045) (129) 3,020 – (2,982) 38
Other 358 – (237) 121 149 – (536) (387)
15,407 (10,174) (4,588) 645 17,600 (10,407) (3,867) 3,326
85,838 (13,767) (49,217) 22,854 83,826 (12,707) (52,928) 18,191
3. Turnover, operating costs and operating surplus
54
Association
2017 2016
Turnover Cost of salesOperating
costs
Operating surplus/(deficit)
Turnover Cost of salesOperating
costs
Operating surplus/(deficit)
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Social housing lettings (Note 4) 22,839 – (13,621) 9,218 19,807 – (13,868) 5,939
Other social housing activities
Development services 31 – – 31 23 – – 23
Supporting People contract income (3) – (27) (30) 321 – (491) (170)
Development costs not capitalised – – (127) (127) – – (162) (162)
First tranche shared ownership sales 3,057 (2,726) – 331 1,155 (899) – 256
BIG lottery fund –restricted funds 44 – (70) (26) 77 – (68) 9
SHPS Tier 4 past service deficit re-measurement see note 26(b) – – – – – – (1,033) (1,033)
Other 201 – (5) 196 146 – – 146
3,330 (2,726) (229) 375 1,722 (899) (1,754) (931)
Non social housing activities
Development for sale 7,040 (7,040) – – 3,276 (3,276) – –
7,040 (7,040) – – 3,276 (3,276) – –
33,209 (9,766) (13,850) 9,593 24,805 (4,175) (15,622) 5,008
3. Turnover, operating costs and operating surplus cont’d
55
4. Particulars of income and expenditure from social housing lettings
GroupGeneral needs housing
Supported housing and for older people
Low cost home ownership
Garages 2017 total 2016 total
£’000 £’000 £’000 £’000 £’000 £’000
Rent receivable net of identifiable service charges 48,314 6,127 1,872 614 56,927 56,743
Service charges receivable 1,146 1,657 404 – 3,207 2,841
Management fees 45 13 – – 58 269
Other income 320 9 11 3 343 207
Net rental income 49,825 7,806 2,287 617 60,535 60,060
Amortisation of grant 185 31 11 – 227 118
Other revenue grants 2,702 30 – – 2,732 34
Turnover from social housing lettings 52,712 7,867 2,298 617 63,494 60,212
Services 1,153 1,567 272 7 2,999 2,930
Management 9,939 1,861 679 104 12,583 14,148
Routine maintenance 7,492 1,098 58 44 8,692 10,235
Planned and major repairs expenditure 2,696 1,815 12 1 4,524 3,511
Rent losses from bad debts 182 149 26 4 361 400
Depreciation of housing properties 9,758 1,848 250 – 11,856 12,691
Operating costs on social housing lettings 31,220 8,338 1,297 160 41,015 43,915
Operating surplus on social housing lettings 21,492 (471) 1,001 457 22,479 16,297
Void losses 285 182 5 137 609 678
56
4. Particulars of income and expenditure from social housing lettings cont’d
AssociationGeneral needs housing
Supported housing and for older people
Low cost home ownership
2017 total 2016 total
£’000 £’000 £’000 £’000 £’000
Rent receivable net of identifiable service charges 13,318 3,871 1,228 18,417 18,099
Service charges receivable 341 932 310 1,583 1,367
Management fees 45 13 – 58 269
Other income – – – – 8
Net rental income 13,704 4,816 1,538 20,058 19,743
Amortisation of grant 12 31 8 51 32
Other revenue grants 2,700 30 – 2,730 32
Turnover from social housing lettings 16,416 4,877 1,546 22,839 19,807
Services 292 935 235 1,462 1,392
Management 3,101 1,033 387 4,521 4,899
Routine maintenance 1,847 711 45 2,603 2,886
Planned and major repairs expenditure 717 588 6 1,311 863
Rent losses from bad debts (49) 20 (2) (31) 210
Depreciation of housing properties 2,983 641 131 3,755 3,618
Operating costs on social housing lettings 8,891 3,928 802 13,621 13,868
Operating surplus on social housing lettings 7,525 949 744 9,218 5,939
Void losses 49 43 5 97 71
57
5. Accommodation in management and development
The number of units of accommodation in management at the end of the period for each class of accommodation is as follows:
Group Association
2017 No. 2016 No. 2017 No. 2016 No.
Social housing
General needs social 8,307 8,377 2,093 2,093
Affordable 579 489 123 81
Supported housing and housing for older people 992 991 652 648
Intermediate Rent 70 70 5 6
Mortgage Rescue 95 99 63 66
Care homes 2 2 – –
Low cost home ownership 790 766 429 406
Leasehold properties 460 413 137 109
Total owned 11,295 11,207 3,502 3,409
Accommodation managed for others – 402 602 979
Total units in management 11,295 11,609 4,104 4,388
Units owned but managed by other agencies 297 297 96 96
Non-social housing
Community buildings 1 1 – 1
Student accommodation 34 34 – –
Market rent lettings 58 57 53 –
Total units owned and managed 11,685 11,998 4,253 4,485
Accommodation in development at the year end 210 147 162 92
58
6. Operating surplus 8. Interest receivable and other income
7. Gain on disposal of fixed assets 9. Interest payable and similar charges
Group Association
This is arrived at after charging:2017£’000
2016£’000
2017£’000
2016£’000
Depreciation of housing properties 11,863 12,691 3,754 3,618
Depreciation of other tangible assets 1,372 966 941 571
Amortisation of goodwill 130 59 – –
Deficit on disposal of fixed assets (146) – (6) –
Operating lease rentals land and buildings 55 53 55 53
Auditor’s remuneration (excluding VAT)
– for audit services 46 63 15 26
– for non-audit services including taxation 14 15 13 15
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Proceeds 7,639 4,219 1,546 1,087
Council clawback (353) (249) – –
Carrying value of fixed assets (3,322) (1,887) (682) (528)
3,964 2,083 864 559
Capital grant recycled (433) (257) (124) (227)
3,531 1,826 740 332
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Interest from listed investments 20 16 20 16
Interest from other investments 150 148 103 70
170 164 123 86
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Loans and bank overdrafts 12,475 10,954 5,339 3,657
Finance leases 3,037 2,916 – –
Other charges 147 761 119 178
15,659 14,631 5,458 3,835
Interest payable capitalised on housing properties under construction
(426) (804) (292) (388)
15,233 13,827 5,166 3,447
Average capitalisation rate used to determine the amount of finance costs capitalised during the period
3.46% 3.55% 3.45% 3.55%
59
10. Employees
Average monthly number of employees (37 hours full time equivalent)
Group Association
2017 No. 2016 No. 2017 No. 2016 No.
Administration 112 99 112 89
Development 71 40 18 –
Housing, support and care 336 405 52 96
519 544 182 185
Staff costs
Wages and salaries 14,832 16,850 6,654 7,744
Social security costs 1,374 1,438 634 662
Other pension costs 1,294 1,711 387 647
17,500 19,999 7,675 9,053
The Group’s employees are members of SHPS.
The SHPS final salary and Career Average Related Earnings (CARE) schemes and WCCPF final salary scheme were closed to all members on the 31 March 2016. Membership and auto enrolment for all employees is now only available in the SHPS defined contribution scheme.
Further information on each scheme is given in note 26 and in the individual subsidiary financial statements.
60
The Chair of the Board received remuneration of £13,593 (2016: £13,593) during the year.
Expenses paid during the year to Board members amounted to £12,084 (2016: £7,593).
Total remuneration paid to Board members in respect of the year was:
2017 Total £
2016 Total £
H Gardner 13,593 13,593
C Victory Rowe 7,750 4,608
P McLaughlin 6,650 5,458
D Cash 5,800 6,650
P Lowe (Audit Chair) 6,650 6,390
D Swann 4,608 4,608
P Starkey 5,993 2,764
J Tibbitts (from 12 September 2016) 3,325 –
L Mitchell (to 31 January 2017) 3,840 2,688
S Palmer (to 31 January 2017) 3,840 2,418
K Roach (to 26 July 2016) 2,123 6,139
W Hall (to 31 March 2016) – 7,750
A Copping (to 22 September 2015) – 2,198
H Taylor-Knox (to 22 September 2015) – 2,198
64,172 67,462
11. Board members and executive directors
61
D Ward, an independent Group Development and Investment Committee member received £4,608 (2016:£4,080) for overseeing the Group Health and Safety portfolio.
J Tibbitts also received £3,325 (2016: £4,939) for chairing the Group Development Committee prior to becoming a Board member.
None of the Board members are current members of the Social Housing Pension Scheme or the Wiltshire Pension Scheme.
2017 Total £
2016 Total £
A Begg 3,060 2,550
W Hall 3,963 –
A Willis (from 21 June 2016) 2,389 –
G Shipley (from 21 June 2016) 2,389 –
M Laurie – 2,550
11. Board members and executive directors cont’d
During the financial year independent Group Audit Committee members received:
62
11. Board members and executive directors cont’d
The emoluments of the highest paid director, the Chief Executive, excluding pension contributions, were £135,000 (2016: £143,100). Total aggregate remuneration paid to the executive directors was:
* Benefits includes £134,524 (2016: £59,267) relating to contractual redundancy and payment in lieu of notice.
The emoluments of the executive directors were:
Salary£’000
Benefits£’000
Pension£’000
2017Total£’000
2016Total£’000
Chief ExecutiveH Toplis
122 13 8 143 150
Operations Director A Campbell-Smith
92 10 6 108 119
Finance DirectorS Murray (from 3 October 2016)
44 5 3 52 –
OD and Corporate Services DirectorA Reilly (from 1 October 2016)
38 4 3 45 –
Managing Director – DevelopmentB Wood (from 8 August 2016)
86 7 5 98 –
Resources and Finance DirectorK Humberstone (to 6 September 2016)
40 76* 3 119 113
Commercial DirectorT Pritchard (to 31 October 2016)
51 65* 3 119 114
Development DirectorV O’Brien (to 3 April 2015)
– – – – 60
473 180 31 684 556
The Chief Executive is an ordinary member of the pension scheme and no enhanced or special terms apply. The Association does not make any further contribution to an individual pension arrangement for the Chief Executive.
The Chief Executive, OD and Corporate Services Director, Operations Director and Finance Director are members of the Social Housing Pension Scheme.
The full time equivalent number of staff (including directors) who received emoluments (excluding pension):
The table above includes amounts paid to individuals who are directors of the subsidiaries but not of the Group. Where these amounts include additional payments such as compensation for loss of office, the full disclosures for these amounts are included in the relevant subsidiary accounts.
2017No.
2016No.
£60,001 to £70,000 3 9
£70,001 to £80,000 4 4
£80,001 to £90,000 2 3
£90,001 to £100,000 1 –
£100,001 to £110,000 1 2
£110,001 to £120,000 2 1
£130,001 to £140,000 1 1
2017£’000
2016£’000
Emoluments (including benefits in kind, redundancy and compensation for loss of ffice) 653 528
Pension contributions 31 28
684 556
63
12. Tax on surplus on ordinary activities for the period
Group Association
(a) Analysis of tax charge in period2017£‘000
2016£‘000
2017£‘000
2016£‘000
Current tax
UK corporation tax on surpluses for the period 367 391 – –
Adjustments in respect of prior periods – (2) – –
367 389 – –
Deferred tax
Charge for the year 6 5 – –
Tax charge on surplus on ordinary activities 373 394 – –
(b) Factors affecting the tax charge for the period
The tax assessed for the period differs to the standard rate of corporation tax in the UK, as explained below:
Group Association
2017£‘000
2016£‘000
2017£‘000
2016£‘000
Surplus for the year before tax 11,188 6,092 4,532 3,242
Theoretical tax of 20% (2016: 20%) 2,237 1,218 906 648
Effects of:
Surpluses not liable to tax (1,870) (827) (906) (648)
Adjustments in respect of prior periods – (2) – –
Current tax charge for the period 367 389 – –
64
13. Tangible fixed asset properties
Group
Social housing properties held
for lettingLettings leasehold
Social housing properties under
construction
Shared ownership properties held for
letting
Shared ownership properties under
constructionTotal
£’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2016 644,175 5,124 13,241 42,582 3,281 708,403
Additions 1,334 – 12,756 – 4,625 18,715
Works to existing properties 6,166 44 – – – 6,210
Interest capitalised – – 860 – 290 1,150
Transfers 14 – – (125) 111 –
Schemes completed 12,593 – (12,484) 5,844 (5,142) 811
Disposals (4,889) – – (1,410) – (6,299)
At 7 April 2017 659,393 5,168 14,373 46,891 3,165 728,990
Depreciation and impairment
At 1 April 2016 49,213 739 – 779 – 50,731
Charged in year 11,636 75 – 152 – 11,863
Disposals (2,432) – – (13) – (2,445)
At 7 April 2017 58,417 814 – 918 – 60,149
Net book value
At 7 April 2017 600,976 4,354 14,373 45,973 3,165 668,841
At 31 March 2016 594,962 4,385 13,241 41,803 3,281 657,672
65
13. Tangible fixed asset properties cont’d
Association
Social housingproperties
held for letting
Social housingproperties
under construction
Shared ownershipproperties held for
letting
Shared ownershipproperties under
constructionTotal
£’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2016 219,727 5,908 23,619 2,621 251,875
Additions – 10,295 – 4,182 14,477
Works to existing properties 1,295 – – – 1,295
Interest capitalised – 780 – 273 1,053
Schemes completed 6,539 (6,539) 4,247 (4,247) –
Disposals (1,109) – (651) – (1,760)
At 7 April 2017 226,452 10,444 27,215 2,829 266,940
Depreciation and impairment
At 1 April 2016 13,907 – 416 – 14,323
Charged in year 3,602 – 152 – 3,754
Disposals (493) – (13) – (506)
At 7 April 2017 17,016 – 555 – 17,571
Net book value
At 7 April 2017 209,436 10,444 26,660 2,829 249,369
At 31 March 2016 205,820 5,908 23,203 2,621 237,552
66
13. Tangible fixed asset properties cont’d
The Group has taken advantage of deemed cost transitional relief.
Social housing assistance
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Total accumulated SHG receivable at 31 March was:
Recognised in the Statement of Comprehensive Income
212 154 36 –
Held as deferred income (note 25) 18,446 17,815 4,541 4,592
Subsumed within reserves 184,734 181,754 103,709 100,998
203,392 199,723 108,286 105,590
Expenditure on works to existing properties
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Components capitalised 6,210 6,666 1,295 1,951
Amounts charged to income and expenditure account
4,524 3,511 1,311 863
10,734 10,177 2,606 2,814
Housing properties book value, net of depreciation comprises
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Freehold land and buildings 659,747 651,020 244,344 235,285
Long leasehold land and buildings 8,638 6,190 4,569 1,805
Short leasehold land and buildings 456 462 456 462
668,841 657,672 249,369 237,552
Included in the Group housing properties are assets held under finance leases with a net book value of £52.9m (2016: £51.4m).
ImpairmentThe Group considers individual schemes to be separate Cash Generating Units (CGUs) when assessing for impairment, in accordance with the requirements of FRS102 and SORP 2014.
67
14. Investment properties non-social housing held for letting
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
At 1 April 5,191 4,290 – –
Additions (5) 901 6,923 –
Increase in value 1,737 – – –
At 7 April 2017 6,923 5,191 6,923 –
GreenSquare Group Limited, owns 53 market-rental properties, which have been valued by Savills LLP, Chartered Surveyors, on a market value – subject to tenancy basis at 26 January 2017. The valuation was undertaken in accordance with the appraisal and valuation manual of the Royal Institute of Chartered Surveyors.
68
15. Tangible fixed assets – other
GroupFreehold
offices
Office equipment
and fittings ComputersMotor
vehicles Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2016 5,445 3,834 5,570 1,894 16,743
Additions 553 352 266 108 1,279
Disposals (140) – – (242) (382)
At 7 April 2017 5,858 4,186 5,836 1,760 17,640
Depreciation
At 1 April 2016 1,494 2,103 3,956 1,116 8,669
Charged in year 294 226 586 266 1,372
Disposals – – – (224) (224)
At 7 April 2017 1,788 2,329 4,542 1,158 9,817
Net book value
At 7 April 2017 4,070 1,857 1,294 602 7,823
At 31 March 2016 3,951 1,731 1,614 778 8,074
AssociationFreehold
offices
Office equipment
and fittings ComputersMotor
vehicles Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 April 2016 1,933 2,648 3,243 272 8,096
Additions – 102 266 33 401
Disposals – – – (16) (16)
At 7 April 2017 1,933 2,750 3,509 289 8,481
Depreciation
At 1 April 2016 750 1,039 1,700 104 3,593
Charged in year 202 163 526 50 941
Disposals – – – (9) (9)
At 7 April 2017 952 1,202 2,226 145 4,525
Net book value
At 7 April 2017 981 1,548 1,283 144 3,956
At 31 March 2016 1,183 1,609 1,543 168 4,503
69
16. Fixed asset investments
The Association owns issued share capital of the following companies incorporated and registered in England:
Company Type of share % held Principal activityWestlea Housing Association Ltd Ordinary £1 100% Registered housing
provider (1)GreenSquare Community Housing Ordinary £1 100% Registered housing
provider (1)GreenSquare Homes Limited Ordinary £1 87.5% (a) Commercial letting (2)GreenSquare Construction Limited Ordinary £1 100% (b) Housing construction
(2)GS Energy Services Limited Ordinary £1 100% (c) Gas servicing (2)GreenSquare Estates Limited Ordinary £1 100% (d) Grounds maintenance
(2)
(1) Registered in England under the Co-operative and Community Benefit Societies Act 2014
(2) Limited liability company incorporated in England under the Companies Act 2006
(a) The remaining 12.5% is held by Westlea Housing Association.(b) Shares held by Westlea Housing Association.(c) Shares held by GreenSquare Homes Limited(d) Shares held by GreenSquare Homes Limited
GreenSquare Group Ltd is the ultimate parent undertaking.
The Group also owned, at nil cost, a 50% share in HAB Oakus LLP, a joint venture partnership, which had remained dormant throughout the whole of the current and prior year and was dissolved on 3 November 2015.
During the year the Association made the following recharges and allocations with GreenSquare Homes Ltd, GreenSquare Construction Ltd, GS Energy Services Ltd and GreenSquare Estates Ltd non-regulated entities:
2017£’000
2016£’000
Allocation basis
GreenSquare Homes Ltd Management services
302 302 Fixed
GreenSquare Construction Ltd Management services
– 282 Fixed
GS Energy Services Ltd Management services
57 57 Fixed
GreenSquare Estates Ltd Management services
6 6 Fixed
2017£
2016£
Shares in Group undertakings at 31 March 16 16
70
17. Stock and property held for sale 18. Trade and other debtors
19. Current asset investments
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Raw materials and consumables 290 345 30 27
Properties being developed for sale 9,766 10,648 4,537 7,109
Shared ownership properties
Properties under construction 1,002 3,090 898 1,673
Completed properties 671 1,016 671 965
11,729 15,099 6,136 9,774
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Investments listed on a recognised stock exchange
537 487 537 487
537 487 537 487
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Due within one year
Rent and service charges receivable 3,486 3,791 1,252 1,271
Less: provision for bad and doubtful debts (1,684) (2,086) (501) (849)
1,802 1,705 751 422
Due from subsidiary undertakings – – 163 1,730
Other debtors 2,908 4,432 699 1,092
Prepayments and accrued income 827 817 378 424
5,537 6,954 1,991 3,668Stocks recognised as an expense in the year were £10,454k (2016: £2,300k).
The listed investments are held at market value. The historical cost of these investments at 7 April 2017 was £472,761 (2016: £442,851).
71
20. Creditors: amounts falling due within one year 21. Creditors: amounts falling due after more than one year
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Debt (note 22) 9,115 2,877 1,901 1,856
Bank overdraft 482 – – –
Trade creditors 2,514 4,690 930 1,728
Amount due to subsidiary undertakings – – 307 1,108
Rent and service charges received in advance 1,230 911 515 440
Recycled capital grant fund (note 23) 498 189 – –
Corporation tax – – – –
Other taxation and social security 101 312 35 45
Other creditors 4,330 3,703 3,085 1,930
Accruals and deferred income 4,173 3,839 – 131
22,443 16,521 6,773 7,238
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
Debt (note 22) 365,844 339,096 130,364 98,356
Deferred capital grant (note 25) 18,446 17,815 4,541 4,592
Recycled capital grant fund (note 23) 1,044 920 1,044 920
Disposal proceeds fund (note 24) 171 171 171 171
Sinking funds for leasehold schemes 1,256 959 626 489
Loan stock 7 7 7 7
Other long term creditors 544 176 545 176
387,312 359,144 137,298 104,711
Loans are stated after the deduction of £1,002,000 (2016: £2,346,000) of issue costs which are amortised over the expected life of the loan.
Major repairs sinking funds are maintained for several leasehold estates to provide for repairs of a long term nature. Residents contribute through the service charge.
Housing loans from Orchardbrook Ltd (former Housing Corporation loans), building societies and banks are secured by floating charges over the assets of the Group, and by fixed charges on individual properties and are repayable at varying rates of interest in instalments due as detailed overleaf.
72
22. Debt analysis
Group2017£’000
2016£’000
Due within one year
Bank overdraft 482 –
Bank loans 9,115 2,877
9,597 2,877
Due after more than one year
Bank loans 366,846 341,442
Less: issue costs (1,002) (2,346)
365,844 339,096
Total debt 375,441 341,973
Association2017£’000
2016£’000
Due within one year
Bank loans 1,901 1,856
1,901 1,856
Due after more than one year
Bank loans 131,154 99,157
Less: issue costs (790) (801)
130,364 98,356
Total debt 132,265 100,212
SecurityThe bank loans are secured by fixed charges on individual properties.
Terms of repayment and interest ratesThe bank loans are repayable by instalments, with the final instalments due to be paid in the period to 2043. At the year end, the association had approximately 56% of it’s debt fixed with an average interest rate of 4.3%, with the remaining floating debt at an average interest rate of 1.9%.
At 7 April 2017, the Group had undrawn loan facilities of £0m (2016: £34m). Since year end, the association has not redeemed any loans (2016: £Nil).
Based on the lender’s earliest repayment date, borrowings are repayable as follows:
Group Assocation
2017£’000
2016£’000
2017£’000
2016£’000
Within one year 9,115 2,877 1,901 1,856
Between one and two years 9,005 9,119 1,792 1,901
Between two and five years 33,494 30,603 11,853 8,950
After five years 323,345 299,374 116,719 87,505
374,959 341,973 132,265 100,212
73
23. Recycled capital grant fund
24. Disposal proceeds fund
25. Deferred capital grant
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
At 1 April 1,109 852 920 693
Grants recycled 433 257 124 227
Balance at 7 April 2017 1,542 1,109 1,044 920
Group Association
2017£’000
2016£’000
2017£’000
2016£’000
At 1 April 17,815 17,447 4,592 4,075
Grants received in the year 3,558 553 2,700 548
Released to income in year (2,927) (185) (2,751) (31)
18,446 17,815 4,541 4,592
Group and Association2017£’000
2016£’000
At 1 April 171 171
Grants recycled – –
Balance at 7 April 2017 171 171
74
26. Pensions
The Group’s employees are members of Social Housing Pension Scheme (SHPS). One subsidiary also participated in the Wiltshire County Council Pension Fund (WCCPF) and the Pension Trust’s Growth Plan (PTGP) but has no active members and withdrew from the plan and settled any liability as from 2 September 2016. Further information on each scheme is given below and in the individual subsidiary financial statements.
(a) Wiltshire County Council Pension Fund – Scheme closed by employer
One of the Group’s subsidiaries, Westlea Housing Association, participated in the WCCPF, a multi-employer scheme with more than one participating employer.The scheme closed on 31st March 2016 and members transferred to the SHPS defined contribution scheme.
The Wiltshire County Council Pension Fund is a defined benefit scheme, part of the local government Superannuation Regulation 1986 (as amended) and the calculations have been made by an independent qualified actuary. Triennial actuarial valuations have been made by a qualified actuary using the projected unit method. The most recent formal actuarial valuation was completed as at 31 March 2016 and rolled forward, allowing for the different financial assumptions required under FRS 102, to 31 March 2017 by a qualified independent actuary.
The income and expenditure charge for pension costs, the accounting policies and the disclosures are given on the basis of FRS102.
Financial AssumptionsThe major assumptions used by the actuary in assessing the scheme liabilities on a FRS 102 basis were:
7 April 2017% Per Annum
31 March 2016% Per Annum
Inflation (CPI) 2.4 2.1
Salary increases 2.4 2.2
Pension increases 2.4 2.2
Discount rate 2.5 3.4
RPI Increases 3.4 3.1
MortalityLife expectancy is based on the Fund’s Vita Curves with improvements in line with the CMI 2013 model assuming the current rate of improvements has peaked and will converge to a long term rate of 1.25% p.a. Based on these assumptions, the average future life expectancies from age 65 are summarised below:
Males Females
Current pensioners 22.5 years 24.9 years
Future pensioners 24.1 years 26.7 years
ContributionsThe contributions to the Wiltshire County Council Pension Fund by the Association for the year ended 31 March 2017 are shown below.
2017£’000
2016£’000
Employer contributions 512 659
At 31 March 2017, no current employees are active members of the scheme (2016: 2). The employers contribution rate for 2016/17 was £512,000, the past deficit annual monetary amount, and is expected to be £509,000 for 2017/18. The member’s contribution rate was nil.
Amounts recognised in surplus or deficit:
2017£’000
2016£’000
Current service costs – (246)
Past service cost – (38)
Amounts charged to operating costs – (284)
2017£’000
2016£’000
Interest income on plan assets 532 531
Interest cost on defined benefit obligation (758) (806)
Amounts charged to other finance costs (226) (275)
Re-measurements recognised in other comprehensive income
2017£’000
2016£’000
Return on fund assets in excess of interest 2,416 (1,125)
Other actuarial gains/(losses) on assets (344) 349
Changes in financial assumptions (4,155) 2,551
Changes in demographic assumptions 305 –
(1,778) 1,775
75
Fair value of employer assets2017£’000
2016£’000
Equities 13,068 11,404
Bonds 2,577 2,217
Property 2,393 2,059
Cash 368 158
Total 18,406 15,838
Net pension liability2017£’000
2016£’000
Fair value of employer assets 18,406 15,838
Present value of the defined benefit obligation (26,816) (22,756)
Net liability (8,410) (6,918)
Reconciliation of opening & closing balances of the present value of the defined benefit obligation
2017£’000
2016£’000
Opening scheme liabilities 22,756 25,548
Current and past service costs – 284
Interest cost 758 806
Contributions by members – 54
Estimated benefits paid (892) (1,036)
Re-measurements 4,194 (2,900)
Closing scheme liabilities 26,816 22,756
Reconciliation of opening & closing balances of the fair value of plan assets
2017£’000
2016£’000
Opening fair value of scheme assets 15,838 16,755
Interest income on plan assets 532 531
Contributions by members – 54
Contributions by employers 512 659
Benefits paid (892) (1,036)
Return on assets less interest 2,416 (1,125)
Closing fair value of scheme assets 18,406 15,838
Change in assumptions at 31 March 2017
Approximate increase to
employer liability
%
Approximatemonetary
amount£’000
0.5% decrease in Real Discount Rate 8% 2,180
1 year increase in member life expectancy 3% 804
0.5% increase in the Salary Increase Rate 0% 3
0.5% increase in the Pension Increase Rate 8% 2,168
Sensitivity AnalysisThe sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
76
26. Pensions cont’d
(b) Social Housing Pension Scheme (SHPS)
The Group participates in the Social Housing Pension Scheme, a multi-employer scheme which provides benefits to some 500 non-associated employers. The scheme is a defined benefit scheme in the UK. It is not possible for the Group to obtain sufficient information to enable it to account for the scheme as a defined benefit scheme. Therefore it accounts for the scheme as a defined contribution scheme.
The scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator and Technical Actuarial Standards issued by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension schemes in the UK.
The scheme is classified as a ‘last-man standing arrangement’. Therefore the Group is potentially liable for other participating employers’ obligations if those employers are unable to meet their share of the scheme deficit following withdrawal from the scheme. Participating employers are legally required to meet their share of the scheme deficit on an annuity purchase basis on withdrawal from the scheme.
A full actuarial valuation for the scheme was carried out with an effective date of 30 September 2014. This actuarial valuation was certified on 23 November 2015 and showed assets of £3,123m, liabilities of £4,446m and a deficit of £1,323m. To eliminate this funding shortfall, the trustees and the participating employers have agreed that additional contributions will be paid, in combination from all employers, to the scheme as follows:
Deficit contributions
Tier 1 £40.6m per annum
From 1 April 2016 to 30 September 2020
(payable monthly and increasing by 4.7% each year on 1 April)
Tier 2 £28.6m per annum
From 1 April 2016 to 30 September 2023
(payable monthly and increasing by 4.7% each year on 1 April)
Tier 3 £32.7m per annum
From 1 April 2016 to 30 September 2026
(payable monthly and increasing by 3.0% each year on 1 April)
Tier 4 £31.7m per annum
From 1 April 2016 to 30 September 2026
(payable monthly and increasing by 3.0% each year on 1 April)
Note that the scheme’s previous valuation was carried out with an effective date of 30 September 2011; this valuation was certified on 17 December 2012 and showed assets of £2,062m, liabilities of £3,097m and a deficit of £1,035m. To eliminate this funding shortfall, payments consisted of the Tier 1, 2 & 3 deficit contributions.
Where the scheme is in deficit and where the Group has agreed to a deficit funding arrangement, the Group recognises a liability for this obligation. The amount recognised is the net present value of the deficit reduction contributions payable under the agreement that relates to the deficit. The present value is calculated using the discount rate detailed in these disclosures. The unwinding of the discount rate is recognised as a finance cost.
Present values of provision2017£,000
2016£‘000
2015£‘000
Group
Present value of provision 5,600 6,007 4,650
Association
Present value of provision 3,217 3,426 2,514
77
26. Pensions cont’d
Reconciliation of opening and closing provisions
Group2017£’000
2016£’000
Provision at start of period 6,007 4,650
Unwinding of the discount factor 196 154
Deficit contribution paid (787) (584)
Remeasurements – assumption/amendments to the contribution schedule 184 1,787
5,600 6,007
Association2017£’000
2016£’000
Provision at start of period 3,426 2,514
Unwinding of the discount factor 112 84
Deficit contribution paid (431) (305)
Remeasurements – assumption/amendments to the contribution schedule 110 1,133
3,217 3,426
Income and expenditure impact
Group2017£’000
2016£’000
Interest expense 196 154
Remeasurements – assumption/amendments to the contribution schedule 184 1,787
Association2017£’000
2016£’000
Interest expense 112 184
Remeasurements – assumption/amendments to the contribution schedule 110 1,133
Assumptions
Group and Association 2017 2016 2015
Rate of discount 2.6% 3.50% 3.50%
The discount rates shown above are the equivalent single discount rates which, when used to discount the future recovery plan contributions due, would give the same results as using a full AA corporate bond yield curve to discount the same recovery plan contributions.
78
26. Pensions cont’d
Deficit contributions scheduleThe following schedule details the deficit contributions agreed between the Group and the scheme at each year end period:
Year ending2017£’000
2016£’000
2015£’000
Year 1 817 785 584
Year 2 850 817 608
Year 3 883 850 635
Year 4 758 884 662
Year 5 622 757 690
Year 6 645 622 559
Year 7 538 644 417
Year 8 423 539 433
Year 9 436 422 321
Year 10 225 436 200
Year 11 – 225 205
Year 12 – – 106
The Group must recognise a liability measured as the present value of the contributions payable that arise from the deficit recovery agreement and the resulting expense in the income and expenditure account i.e. the unwinding of the discount rate as a finance cost in the period in which it arises.
It is these contributions that have been used to derive the Group’s balance sheet liability.
The Group has been notified by the Pensions Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme based on the financial position of the scheme as at 30 September 2016. As of this date the estimated employer debt for the Group was £56.9m and for the Association was £34.4m.
(c) Pension Trust’s Growth Plan – Scheme closed by employer
One of the Group’s subsidiaries, Westlea Housing Association, previously participated in the Pensions Trust’s Growth Plan, a multi-employer scheme which provides benefits to some 1,300 non-associated participating employers. The scheme is a defined benefit scheme in the UK. It is not possible for the company to obtain sufficient information to enable it to account for the scheme as a defined benefit scheme. Therefore it accounted for the scheme as a defined contribution scheme.
The scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator and Technical Actuarial Standards issued by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension schemes in the UK.
The scheme is classified as a ‘last-man standing arrangement’. Therefore the company is potentially liable for other participating employers’ obligations if those employers are unable to meet their share of the scheme deficit following withdrawal from the scheme. Participating employers are legally required to meet their share of the scheme deficit on an annuity purchase basis on withdrawal from the scheme.
Westlea Housing Association does not have any active members in the Pensions Trust’s Growth Plan (the Plan) and withdrew from the Plan and is no longer a participating employer as from 2 September 2016.
In compliance with section 75 of the Pensions Act 1995 the scheme actuary calculated the employer debt on withdrawal and in accordance with the Occupational Pension Schemes (Employer Debt) Regulations 2005 (as amended) and Statutory Instrument 2008/731 full settlement of the £45,365 employer debt was made in September 2016.
79
26. Pensions cont’d
Present values of provision
2017£
2016£
2015£
Present values of provision – 8,824 6,267
Reconciliation of opening and closing provisions
2017£
2016£
Provision at start of period 8,824 6,267
Unwinding of the discount factor – 205
Remeasurements – amendments to the contribution schedule
36,541 3,161
Deficit contribution paid (45,365) (809)
– 8,824
Income and expenditure impact
2017£
2016£
Interest expense – 205
Remeasurements – amendments to the contribution schedule
– 3,161
Assumptions
2017£
2016£
2015£
Rate of discount 2.60% 3.50% 3.50%
The discount rates shown above are the equivalent single discount rates which, when used to discount the future recovery plan contributions due, would give the same results as using a full AA corporate bond yield curve to discount the same recovery plan contributions.
Deficit contributions scheduleThe following schedule details the deficit contributions agreed between the company and the scheme at each year end period:
Year ending2017
£2016
£2015
£
Year 1 – 963 809
Year 2 – 992 834
Year 3 – 1,021 859
Year 4 – 1,052 884
Year 5 – 1,084 911
Year 6 – 1,116 938
Year 7 – 1,150 966
Year 8 – 1,184 995
Year 9 – 1,220 –
Year 10 – 628 –
The company must recognise a liability measured as the present value of the contributions payable that arise from the deficit recovery agreement and the resulting expense in the income and expenditure account i.e. the unwinding of the discount rate as a finance cost in the period in which it arises.
It is these contributions that have been used to derive the company’s balance sheet liability.
(d) Oxfordshire County Council Pension Fund – scheme closed by employer
The Group and Association participated in the Oxfordshire County Council Pension Fund (OCCPF) a multi-employer scheme with more than one participating employer. The Association has a pass through agreement with the Local Authority and was therefore not responsible for any past service deficit in respect of the active, deferred or pensioner members. On withdrawal no future contributions are payable so the net liability in respect of past service is zero.
The scheme closed on 31 March 2016 and any members transferred to a defined contribution scheme.
80
27. Provisions for liabilities 28. Non-equity share capital
Group and Association2017
£2016
£
Shares of £1 each issued and fully paid
At 1 April 151 150
Shares issued/(redeemed) during the year (74) 1
At 7 April 77 151
The shares provide members with the right to vote at general meetings, but do not provide any rights to dividends or distributions on a winding up.
GroupLeave Pay
SHPS Pension Obligation (note 26b)
Deferred Taxation
Restructure Total
£’000 £’000 £’000 £’000 £’000
At 1 April 2016 160 6,015 12 432 6,619
Additions 6 417 – – 423
Released in the year (14) (832) – (431) (1,277)
At 7 April 2017 152 5,600 12 1 5,765
The deferred tax liability relates to the timing differences associated with previous post year end gift aid payments.
AssociationLeave Pay
SHPS Pension Obligation (note 26b)
Restructure Total
£’000 £’000 £’000 £’000
At 1 April 2016 82 3,426 393 3,901
Provided in the year – 222 – 222
Released in the year (11) (431) (393) (835)
At 7 April 2017 71 3,217 – 3,288
The leave pay provision represents holiday balances accrued as a result of services rendered in the current period and which employees are entitled to carry forward. The provision is measured as the salary cost payable for the period of absence.
The SHPS pension obligations are referred to in note 26(b). The provision is based on the net present value of payments agreed at year end. The provision will be adjusted following the triennial valuations in the pension scheme, either increasing or decreasing the provision with the opposite entry being shown as operating costs within income and expenditure. The unwinding of the discount is shown as a finance cost.
81
29. Financial commitments
GroupCapital expenditure commitments are as follows:
2017£’000
2016£’000
Expenditure contracted for but not provided in the accounts 34,979 12,219
Expenditure authorised by the Board, but not contracted 24,003 15,021
58,982 27,240
The above commitments will be financed primarily through borrowings and new funding arrangements, social housing grant, property sales and internal cash balances.
Operating leasesThe annual payments which the Group is committed to make in the next year under operating leases are as follows:
Temporary housing and office equipment leases expiring:2017£’000
2016£’000
One to five years 55 53
55 53
Obligations under finance leasesSome housing assets are held under finance lease arrangements. As of 7 April 2017, the net carrying amount of the facility is £55.2m and this is disclosed within loans due after more than one year in note 22. Leases are stated net of issue costs which are amortised on a straight line basis over the term of the agreement.
Finance lease liabilities are secured by the related assets held under finance leases. Future minimum finance lease payments at the end of each reporting period under review were as follows:
2017£’000
2016£’000
Due within one year 3,112 2,963
Between one and five years 12,968 12,343
Due after five years 120,739 120,416
136,819 135,722
82
30. Cash flow from operating activities 31. Related parties
There was one tenant member of the Group Board during the year, K Roach. Her tenancy was on normal commercial terms and the tenant board members are not able to use their position to their advantage.
Transactions/balances with GreenSquare Homes LimitedGreenSquare Group Ltd (GreenSquare) owns 87.5% of the ordinary share capital of GreenSquare Homes Limited (GreenSquare Homes).
During the year GreenSquare parent purchased goods and services from GreenSquare Homes with a value of £6,315,000 (2016: £nil) and sold goods and services to GreenSquare Homes with a value of £671,093 (2016: £367,667). At 7 April 2017 there were sums outstanding from GreenSquare Homes of £2,258 (2016: £1,272,769), and these amounts are disclosed in note 18 as appropriate.
The Association has taken advantage of the exemptions conferred by FRS102 in not disclosing transactions with wholly owned members of the GreenSquare Group.
Disclosures in relation to key management personnel are included in note 11.
32. Goodwill on acquisition
Movement on goodwill:
2017£’000
2016£’000
Positive goodwill 130 189
Amortisation for the year (130) (59)
Positive goodwill at end of year – 130
Group2017£’000
2016£’000
Surplus for the year 10,815 5,698
Adjustments for non-cash items:
Depreciation and impairment of tangible fixed assets 13,244 13,167
Amortisation of intangible assets (2,927) 204
Decrease/(increase) in stock 3,369 (413)
Decrease/(increase) in debtors 3,683 9,972
Increase/(decrease) in creditors 684 (13,379)
Increase/(decrease) in provisions (439) 442
Gift Aid provision (1,250) 1,000
Goodwill amortised 130 59
Pensions costs less contributions payable (665) 1,159
Movement in fair value of financial instruments 92 (87)
Carrying amount of property disposals 3,544 3,142
30,280 20,964
Adjustments for investing or financing activities
Proceeds from sale of tangible fixed assets (7,640) (6,244)
Taxation 34 394
Gift Aid receivable 400 (1,000)
Interest payable 15,599 14,175
Interest received (170) (173)
Net cash inflow from operating activities 38,503 28,116
83
33. Financial assets and liabilities
The board policy on financial instruments is explained in the Board Report as are references to financial risks.
Categories of financial assets and financial liabilities
2017£’000
2016£’000
Financial assets measured at fair value through surplus and deficit 537 487
Financial assets that are debt instruments measured at amortised cost 74,431 36,849
Financial liabilities measured at fair value through surplus and deficit (4,517) (4,610)
Financial liabilities measured at amortised cost (370,924) (337,363)
Total (300,473) (304,637)
Financial assetsFinancial assets held include cash at bank, deposits placed on money markets and investments. They are sterling denominated.
2017£’000
2016£’000
74,968 37,336
The financial assets on which no interest is earned comprise trade investments that have no fixed maturity. The remaining financial assets are floating rate, attracting interest at rates that vary with bank rates.
Financial liabilities excluding trade creditors – interest rate risk profileThe Association’s financial liabilities are sterling denominated. The interest rate profile at 31 March was:
2017£’000
2016£’000
Fixed rate 270,591 250,772
Variable rate 106,782 93,547
The Group’s fixed rate financial liabilities have a weighted average interest rate of 4.4% (2016: 4.7%) and the weighted average period for which it is fixed is approximately 16 years (2016: 8 years)
The variable rate financial liabilities have a weighted average interest rate of 2.1% (2016: 2.0%).
The debt maturity profile is shown in note 22.
Borrowing facilitiesThe Association has undrawn committed borrowing facilities. The facilities available at 31 March in respect of which all conditions precedent had been met were as follows:
2017£’000
2016£’000
Expiring in one year or less – 34,000
Total – 34,000
84
34. Group merger
On 7 October 2016 three of the Group’s main registered societies – GreenSquare Group Ltd, Oxford Citizens Housing Association Limited (OCHA) and Oxbode Housing Association Limited (Oxbode) – formally merged under section 109 of the Co-operative and Community Benefit Societies Act 2014. This was designed to rationalise the operation of the Group following a period of consultation with stakeholders. The new GreenSquare Group Limited being the newly formed parent company under which the merged organisations and Group would operate.
The summary individual results for these three societies for the period 1 April 2016 to 6 October 2016 which has been accounted for under the merger accounting rules and included in the Group and Association results for the period were as follows:
For the period ended
7 October 2016
For the year ended
31 March2016
£’000 £’000
Turnover 3,991 8,468
Operating expenditure (3,992) (8,468)
Operating surplus (1) –
Interest receivable and other income
1 –
Gift aid receivable – 250
Surplus before tax – 250
Total comprehensive income for the period
– 250
For the period ended
7 October 2016
For the year ended
31 March2016
£’000 £’000
Tangible fixed assets
Other tangible fixed assets 1,492 1,561
1,492 1,561
Current assets
Debtors 1,975 2,025
Cash at bank and in hand 962 1,236
2,937 3,261
Creditors: amounts falling due within one year
(272) (607)
Net current assets 2,665 2,654
Total assets less current liabilities
4,157 4,215
Creditors: amounts falling due after more than one year
– –
Provisions for liabilities (154) (212)
Total net assets 4,003 4,003
Capital and reserves
Revenue reserve 4,003 4,003
Total reserves 4,003 4,003
(a) GreenSquare Group Ltd Statement of Comprehensive Income
GreenSquare Group LtdStatement of Financial Position
85
34. Group merger cont’d
For the period ended 7 October 2016
For the year ended 31 March 2016
£’000 £’000
Turnover 17,183 21,956
Operating expenditure (13,242) (17,878)
Operating surplus 3,941 4,078
Gain on disposal of property 535 271
Interest receivable and other income
47 74
Interest and financing costs (1,708) (2,918)
Movement in fair value of financial instruments
– 87
Gift aid – 1,000
Other finance charges – (74)
Surplus before tax 2,815 2,518
Total comprehensive income for the period
2,815 2,518
For the period ended 7 October 2016
For the year ended 31 March 2016
£’000 £’000
Tangible fixed assets
Housing properties 213,462 208,912
Other tangible fixed assets 2,848 2,926
Fixed asset investments 3,315 3,315
219,625 215,153
Stock 4,396 9,774
Debtors 1,983 1,570
Investments 487 487
Cash at bank and in hand 40,589 9,846
47,455 21,677
Creditors: amounts falling due within one year (3,696) (4,700)
Net current assets 43,759 16,977
Total assets less current liabilities 263,384 232,130
Creditors: amounts falling due after more than one year (121,140) (92,323)
Provisions for liabilities (2,985) (3,380)
Total net assets 139,259 136,427
Capital and reserves
Restricted reserve 34 34
Revaluation reserve 96,981 96,823
Revenue reserve 42,244 39,570
Total reserves 139,259 136,427
(b) Oxford Citizens Housing Association Statement of Comprehensive Income
Oxford Citizens Housing Association Statement of Financial Position
86
34. Group merger cont’d
For the period ended 7 October 2016
For the year ended 31 March 2016
£’000 £’000
Turnover 1,382 2,849
Operating expenditure (773) (1,919)
Operating surplus 609 930
Gain on disposal of property (10) 61
Interest receivable and other income
4 12
Interest and financing costs (1,496) (529)
Surplus before tax (893) 474
Total comprehensive income for the period (893) 474
For the period ended 7 October 2016
For the year ended 31 March 2016
£’000 £’000
Tangible fixed assets
Housing properties 28,539 28,640
Other tangible fixed assets 14 16
28,553 28,656
Current assets
Debtors (87) 367
Cash at bank and in hand 1,856 4,068
1,769 4,435
Creditors: amounts falling due within one year (372) (2,225)
Net current assets 1,397 2,210
Total assets less current liabilities 29,950 30,866
Creditors: amounts falling due after more than one year (12,388) (12,388)
Provisions for liabilities (286) (309)
Total net assets 17,276 18,169
Capital and reserves
Revaluation reserve 15,781 15,421
Revenue reserve 1,495 2,748
Total reserves 17,276 18,169
(c) Oxbode Housing Association Statement of Comprehensive Income
Oxbode Housing Association Statement of Financial Position
GreenSquare Group LimitedA registered society with exempt charitable status no. 7418
Registered office: Methuen Park, Chippenham SN14 0GUgreensquaregroup.com