Report and Financial Statements Adactus Housing Group Limited For the year ended 31 March 2014
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Company information Registration number :
29433R
Registered office :
Turner House 56 King Street Leigh Lancashire WN7 4LJ
Board members :
A. Cain (chair) S. Abbas P. Chisnell (executive member – joined Sept 2013) E. Clivery R. Davies C. Dickson (resigned Sept 2013) S. Fyfe (joined Sept 2013) T. Jenkins P. Joyce P. Lees (executive member) H. Roberts (executive member – joined Sept 2013) A. Williams (resigned April 2014)
Senior Management Team :
P. Lees Group Chief Executive P. Chisnell Group Director of Finance B. Moran Group Director of Corporate Services/Company Secretary H. Roberts Group Director of Development/Deputy Chief Executive
Secretary :
B. Moran Group Director of Corporate Services/Company Secretary
Bankers :
National Westminster Bank Plc Manchester City Centre Branch PO Box 305 Spring Gardens Manchester M60 2DB
Auditors :
Grant Thornton UK LLP Statutory Auditors Chartered Accountants 4 Hardman Square Spinningfields Manchester M3 3EB 1
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Table of contents Chair’s statement
Operating and financial review Business and financial review
1 2
3
4
4
Value for money statement
12
New housing development
14 18
Tenancy services Housing assets Community investment
Report of the board
Independent auditor's report
Financial statements Group income and expenditure account
3 4 5
21 25
28
31
32
32
Association income and expenditure account
33
Statement of total recognised surpluses and deficits
34
Reconciliation of movements in Group's and Association's funds
34
Group balance sheet
35
Association balance sheet
36
Group cash-flow statement
37
Notes to the financial statements
38
2
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
1
Chair’s statement It is with no small degree of satisfaction that, at the end of another successful year, I write to introduce the Group’s Report and Financial Statements for the year to 31 March 2014. The results presented in this document throw into sharp relief an organisation that is operating at the leading edge of its housing association peers. Over the course of the past five years we have continued to refine and innovate on our delivery of services to adapt both to changing customer expectations and to new technological opportunities. As a result our current operating model is I believe highly efficient and we are continuing to see both an increase in the regard our customers hold us in, and also year-on-year increasing levels of surplus generated by the business. This is key of course as we put our surplus to good use to protect the organisation from emerging risks (such as the government’s welfare reforms) and also to fund new affordable housing which remains our core strategic objective. Perhaps our biggest area of corporate learning during the year was to clarify that we have successfully adapted to the current low-grant environment. I think that the most telling demonstration of this is that in a year in which we delivered one of the sector’s largest new build programmes for affordable rent, we were able to do so without drawing-down any loan finance.
Our future development programme is looking extremely healthy and we aim to achieve a step-change in our output of new housing in the short-term. Our results and our focus are due to the hard work of staff and the excellent leadership of both our board and executive and I would like to put on record my thanks to them all. In this respect, I would especially like to take this opportunity to thank our board members who will be retiring at this year’s annual general meeting for their efforts and diligence. I have now served as Chair for three stimulating and interesting years and will step down at the annual general meeting. I do so fully confident that the board will be able to choose from a very capable pool of members to take-up the baton in my place. I will remain involved as a board member and will continue to be proud to be associated with this excellent organisation.
Alan Cain Chair
3
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
2
Operating and financial review Business and financial review Principal activities The members of the Adactus group structure (the Group) build, renovate and manage affordable housing for rent and sale and work to help regenerate neighbourhoods. The Group's principal subsidiaries are housing associations, legally known as Registered Providers, and regulated by the regulation committee of the Homes and Communities Agency. The Adactus Housing Group was formed in August 2002 although founder member, Adactus Housing Association Ltd.’s corporate origin was in 1964. The Group's main offices are in Leigh, Chorley and Manchester. The major organisations in the Group are four independent Co-operative and Community Benefit Societies:
Adactus Housing Group Ltd (AHG, the non-charitable Parent). Adactus Housing Association Ltd (AHA, charitable). Beech Housing Association Ltd (BHA, non-charitable). Chorley Community Housing Ltd (CCH, charitable). Together the Adactus Housing Group owns and manages 13,043 homes across 21 local authority areas in the northwest of England and employs close to 600 staff (522 fulltime equivalents). The Group is the 79th largest manager of housing association accommodation in England¹. Figure 2 highlights the geographic spread of properties managed by the Group.
Figure 1: The Adactus Group Structure
Adactus Housing Group Ltd
Beech Housing Association Ltd
Heartland Court Management Ltd
Chorley Community Housing Ltd
James Tomkinson Memorial Cottages Trust
Adactus Housing Association Ltd
Palatine Contracts Ltd
Acuna Ltd
For more information: http://www.adactushousing.co.uk
¹ As measured by turnover.
Source: HCA Global Accounts 2012/13 subsidiary performance consolidated to Group level where applicable.
4
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 2: Location of stock in management
For more information: http://www.adactushousing.co.uk
Objectives and strategy The members of the Adactus Housing Group share similar objects within their company rules which state that the Group’s members will: “Carry on for the benefit of the community the business of providing housing, accommodation, and assistance to help house people and associated facilities and amenities”
“To build, acquire and manage safe, warm and affordable housing predominately for those who are unable to pay market rates.” “To respond effectively to the demands of our customers.” “To make a difference in neighbourhoods by levering in resources and helping to focus community activity.”
This is the basis of the Group’s corporate mission shown here:
5
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
The Group’s long-term vision is framed by efforts to achieve Quality, Expansion and Diversity (QED) through its activities.
For example, quality is raised through an appreciation of the diversity of customer needs and through effective investment of the efficiency savings afforded by expansion.
Figure 3 highlights how each aspect of the Group’s vision is interlinked. Figure 3: Quality, Expansion and Diversity
The vision of QED provides the framework for the Group’s strategic objectives: Figure 4: Strategic objectives linked to QED Objective Quality
Q1. Maintain effective governance Q2. Provide value for money customer services
Expansion
E1. Increase the size of the business through new group members, transfer or development
Diversity
D1. Provide targeted neighbourhood investment D2. Reduce carbon emissions
6
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Performance highlights
The board is pleased to report a retained surplus in the year of £13.3m (2013: £9.9m). Operating surplus has increased by three percentage points to 36% of turnover.
Operating costs per unit increased by 3% to £2,675 per unit from £2,599 per unit in 2013. A summary of the Group’s recent financial results are as follows:
Figure 5: Financial results Operating surplus
Retained surplus/deficit £’000
Retained surplus
Year
Turnover £’000
2009
41,517
35,773
14%
(1,464)
-4%
2010
45,169
39,420
13%
(1,367)
-3%
2011
44,711
41,672
7%
(2,383)
-5%
2012
50,150
33,379
33%
9,000
18%
2013
53,291
33,824
33%
9,936
19%
2014
55,793
34,984
36%
13,259
24%
Operating costs £’000
The board uses a balanced scorecard approach to monitor the delivery of the Group’s strategic objectives across a broad range of Key Performance Indicators (KPIs).
Figure 6 presents the scorecard reviewed by board at the end of the financial year.
Figure 6: KPI performance at 31 March 2014
Larger rectangle size indicates greater importance of measure. Colour indicates performance within or out of target. Bold numbers indicate performance.
7
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
The diagram shows that 23 of the Group’s 29 KPIs were within target and six were outside of target at the year end. Of these, five KPI’s were only marginally outside of target. The remaining KPI, units managed, was significantly outside of its target of 16,500 units for the year. However it should be noted that this target was set as an aspirational figure to provide the executive with a clear mandate for growth to aid potential partnership discussions with other housing associations.
As only one small housing co-operative merged with a Group member in the year, the target was not achieved. Overall, the board is extremely pleased with performance. Highlights of the Group’s balance sheet are as follows:
Figure 7: Balance sheet highlights 2014 £’000 Fixed assets Housing properties at cost Social housing and other
2013 £’000
2012 £’000
2011 £’000
2010 £’000
2009 £’000
489,189 (241,102)
478,302 (238,506)
465,633 (230,357)
442,360 (228,788
400,010 (216,817)
317,925 (185,909)
Current assets Properties for sale Cash at bank and short term deposits
3,024 12,690
2,779 7,876
4,548 11,872
4,471 13,829
3,707 9,285
5,700 8,295
Creditors: Amounts falling due within one year
(32,342)
(14,413)
(22,183)
(27,936)
(17,633)
(11,889)
Net current liabilities
(12,382)
713
(41)
(1,954)
(167)
8,339
Total assets less current liabilities
218,381
225,794
221,368
200,102
175,537
135,492
162,349
182,895
187,652
174,480
152,464
112,378
2,322
2,372
3,050
2,423
628
1,588
1,764
1,167
314
111
4,104
2,842
51,946
39,360
30,353
23,087
18,341
18,684
Creditors: Amounts falling due after more than one year Recycled capital grant and disposal proceeds funds Pension liability
Capital and reserves
Figure 7 highlights that the Group has increased its asset base by £11m² in the year which continues its medium term upward trend. All lender financial covenant ratios were met by all Group members throughout the year.
Most notably, gearing³ has decreased in the year for both AHA and BHA reflecting the excellent performance of the Group as a whole.
² As measured by net growth in housing proper es at cost. ³ As measured by the ra o of total loans as a percentage of social housing grant and reserves.
8
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Risks and uncertainties
Risks that may prevent the Group achieving its objectives are considered and reviewed annually by the senior management team and the board as part of the corporate planning process. The risks are recorded and assessed in terms of their impact and probability and are reported to board and audit committee quarterly together with any
action taken to manage those risks including assessment of key controls and the outcome of any action. Figure 8 presents an assessment of the Group’s operational risks that could affect the delivery of its strategic objectives.
Figure 8: Risk analysis Objective Q2 Interest rates rise leading to breach of covenants
Objective E1
Reduced Group income due to changes in government rent formula in 2015
Changes in Government legislation impacts on financial resources. (Current changes associated with welfare reform and planning)
Poor performance on the Miles Platting PFI leads to higher financial deductions than expected
The Group faces an inability to secure financing on attractive terms as existing funders leave the market
Failure to tackle ASB effectively and promptly
Budget overspends effect the delivery of the development programme
Increasing political sensitivity of our work leads to poor publicity generated by politicians or other external parties Exposure to housing market decline: 1) reduces sale price of properties and/or inability to sell; 2) reduces demand for rented property; 3) left with undeveloped
Staff injured/killed in the course of their duties
Breach of CCH transfer contract
In the current financial climate the organisation runs the risk of increasing its bad debts
Inaccurate performanc e data leads to damaging decisions being made
Introduction of international Financial Reporting Standards (IFRS) leads to covenant breach
Failure to meet regulators requirements
Poor performance in one part of Group impairs regulators assessment of the whole Group
Overstretc hed/ stressed staff
Inability to retain good staff
Government budget cuts/ policy lead to reduced grant income leading to lower levels of development
New building pilot: lack of expertise and capacity
New building pilot: serious accidents
Material fraudulent activity takes place
Immediate loss of key staff
Risk that developme nt schemes are not viable
Insufficient income from sale of uneconomic voids
Failure to achieve HCA targets
Inability to charge security for finance requirements
New initiatives not viable
Increase in inappropriate lettings leading to increase nuisance problems and
Shared Owners enter into mortgage arrears resulting in increased repossessions
Opportunities for business growth missed due to concentration on existing projects
Failure to meet financial covenants
Statutory Housing obligations not met leading to prosecution
Land/ property not available as anticipated
Inability to recruit best the staff
Cost of pension auto-enrolment
Sept RPI falls below Building cost inflation business plan assumption, implying budgeted income increases not being achieved leading to negative impact
Development contractor goes bankrupt
Competiti on for funds/new initiative too high
Property land values increase significantly
Tenant injury/ death due to fire
Tenant injury/ death due to gas
Poor quality of service delivered by Contact Centre
Failure of company’s IT network
Failure of public data network used by company
Unable to deliver effective coregulation
Property becomes unpopular due to changing customer expectatio ns
Tenant injury or death due to flood
Technical problem causes interruption to Contact centre service
Reduction in Supporting people Board members have funding insufficient skills to undertake role Breach of Equality Act 2010
Objective D2 Acceptable
Objective Q1
Benefits indexation linked to CPI rather than RPI leading to tenant hardship
Unacceptable
Objective D1
Larger boxes represent larger areas of inherent risk Residual risk assessment
The analysis shows that the successful delivery of strategic objective Q2 “Provide value for money customer services” is impacted by the greatest number of risks. It also shows that the key inherent risks facing the business are:
Interest rates rise leading to a breach in covenants. Tenant injury/death due to fire. Tenant injury/death due to gas. Changes in government legislation impact on financial resources. Increasing bad debts. Introduction of International Financial Reporting Standards leads to covenant breach. 9
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Reduced income due to changes in the government rent formula in 2015. Overstretched/stressed staff. Poor performance on the Miles Platting PFI contract. Inability to retain good staff. Reduced grant income.
Figure 8 confirms however that once the Group’s controls are applied to mitigate the likelihood or impact risks, the assessment of all residual risks fall within the acceptable levels defined in the Group’s Risk Management Strategy. The Group’s risk map and the controls it has in place to mitigate risks can be explored in further detail on the Group’s website see: www.adactushousing.co.uk and search for ‘risk’.
Poor contact centre service.
Capital structure and treasury policy The Group repaid £2.2m during the year in line with agreed debt repayment profiles. No loan finance was drawn-down during the year. At the year end borrowings amounted to £184m, maturing as follows:
Figure 9: Debt maturity 2014 £’000
2013 £’000
20,240
1,927
Between one and two years
1,552
20,267
Between two and five years
18,353
11,822
144,084
152,413
184,229
186,429
Within one year
After five years
The Group currently borrows from a variety of lenders at both fixed and floating rates of interest. The Group’s Treasury Management Policy targets the level of fixed rates of interest to be up to 100% of its loan portfolio. At year-end in excess of 90% of the Group’s borrowings were at fixed rates between 2.6% and 11.5%. (Further details on the profile of borrowings can be found at note 19 to the Financial Statements). The Group has minimal exposure to derivative based hedging structures. All such exposures will end by 30th September 2014. The Group’s lending agreements require compliance with a number of financial and non financial covenants. The compliance to such covenants is monitored on a monthly basis and reported to board each quarter. The Group was compliant throughout 2013/14 and remains compliant with all loan covenants. 10
Gearing has fallen to below 60% for both AHA and BHA as a result of the Group’s ability to generate cash resources from operational activities thereby restricting the need to draw-down loan facilities. At the year end new facilities were in the process of being negotiated by AHA with two new lenders. These are expected to be completed during the next twelve months which will enable it to refinance an element of its existing debt and to continue to provide funding for its on-going development programme. An element of this new funding was secured in May 2014 under the government backed Affordable Homes Finance scheme. In the year, CCH was successful in agreeing a further £6m of finance from its existing facility to underpin its first development programme.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Since the year end, CCH has entered into discussions with its main lender in relation to providing future development finance. At the year end the Group held £12.7m of cash balances (2013: £7.9m). The Group has a clear focus on cash collection and monitors cash-flow forecasts closely and regularly to ensure it has sufficient funds to meet its business objectives, pay liabilities when they fall due and ensure adequate liquidity with respect to emerging risks. With respect to short term liquidity, the Group has access to £12.7m of cash balances and in excess of £50m of undrawn committed facilities.
Statement of compliance In preparing this Operating and Financial Review and Report of the Board, the board has followed the principles set out in the Statement of Recommended Practice: Accounting by Registered Social Housing Providers (SORP).
Future outlook The remainder of this Operating and Financial Review sets out a comprehensive Value for Money Statement which details the Group’s existing strategy and future plans to achieve its corporate objectives.
The Group’s cash funds increased by £4.9m in the year (2013: reduced by £3.9m).
11
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Value for money statement Value for money (VfM) can be defined as the “optimal use of resources to achieve the intended outcomes” .
Q1. Maintain effective governance
For members of the Adactus Housing Group, efforts to achieve VfM are focused on curating a portfolio of productive housing assets and managing them well to deliver the following core organisational objectives:
E1. Increase the size of the business through new group members, transfer or development
Q2. Provide value for money customer services
D1. Provide targeted neighbourhood investment D2. Reduce carbon emissions The Group’s approach to achieving value for money is summarised in Figure 10 below.
Figure 10: Delivering value for money
Objectives Q1 maintain effective governance Q2 Provide VfM customer services E1 Increase the size of the business D1 Provide targeted neighbourhood investment D2 Reduce carbon emissions
Other influences
Processes
Resources
Inputs
Housing assets
Finance / Staffing
Outputs Services/new housing
Economy
Efficiency
Effectiveness
Spending less
Spending well
Spending wisely
Outcomes New housing development. Tenancy services. Community investment.
Value for money key
The optimal use of resources to achieve the intended outcomes
Contributes to the measurement of….
Figure 10 highlights that VfM can be thought of as an ongoing process of optimising the relationship between resources and outcomes. The remainder of this VfM Statement therefore sets out a comprehensive assessment of the use and maintenance of the Group’s key resources – its housing assets – and the achievement of its intended outcomes for new housing development; tenancy services; and community investment.
Figure 11 provides a high-level overview of how resources were used to achieve outcomes during 2013/14.
h p://www.nao.org.uk/successful commissioning/general principles/value for money/assessing value for money/ Diagram adapted from h p://www.nao.org.uk/successful commissioning/ general principles/value for money/assessing value for money/
12
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 11: Use of resources to achieve outcomes 2013/14
Figure 11 shows where the Group’s cash came from and how it was spent during the year to 31 March 2014. The diagram illustrates that the business generated a cash surplus in the year and did not draw-down on any of its finance facilities to fund its activities. It shows that cash spend in the year was prioritised firstly on ‘New housing development’ (47% of total spend) which includes the payment of most of the Group’s capital and interest costs of loan finance.
Following this, expenditure focused on ‘Tenancy services’ (29% of total spend) and then on ‘Housing assets’ (23% of total spend). Finally, cash spent on ‘Community investment’ comprised just under 1% of the total. Each of these outcomes are examined in greater detail on pages 12 to 27.
In order to aid transparency and accessibility, many of the diagrams and tables presented in this statement (along with their underlying data) have been made available as interactive visualisations on the Group’s website and may be explored for further detail. Visit www.adactushousing.co.uk and search for ‘VfM’ to learn more.
13
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
New housing development In 2013/14 the Group’s members delivered 129 units of affordable housing, bringing the total number of new housing units completed to 548 in the three years to 31 March 2014 as show in Figure 12. Figure 12: New affordable housing delivered 2011/12 - 2013/14
All new housing developments are expected to provide a positive financial return, acting to strengthen the financial position of the Group’s members and helping to refresh their asset portfolios. The economic impact of housing development can be estimated through the National Housing Federation’s CEBR database .
An estimate of the impact of the Group’s development activity in recent years is shown in Figure 13 below and is clearly significant. Over 350 jobs each year are estimated to have been supported through the Group’s investment in new development since 2011.
Figure 13: Economic impact of housing development 2011/12 2013/14
Homes provided
Jobs supported
Impact on local economy
548
+1,127
+£48.5m Source: Estimates from the NHF CEBR database
The Group’s provision of new housing generates wider value for society as new housing provides people with better places to live. 14
See: h p://www.housing.org.uk/policy/localism/local enterprise partnerships/
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
A recent study examines the relationship between wellbeing and housing . It suggests that the social impact of good quality housing association accommodation in terms of well-being effects alone can be valued at up to £997 per person housed per year in comparison with other rental alternatives. The social value generated from improving the lives of the 824 adults rehoused into the Group’s new developments in the period 2011-2014 is therefore estimated to be in the region of £800k per annum.
Through careful architectural design, the Group’s housing developments also contribute to improvements to the general built environment and towards efforts to reduce carbon emissions. Figure 14 presents a selection of the new housing delivered by the Group’s members in 2013/14.
Figure 14: Good design in new housing 2013/14
Grove Farm, Adlington - completed September 2013
Strands Farm, Lancaster - completed December 2013
The Group’s strategic aim is not only to continue to develop but to accelerate its current levels of development to deliver 500 homes per annum. In the next three years, this is expected to inject an additional £130m into the northwest economy, support in excess of 1,000 jobs per annum, and provide social value to new tenants of up to £3m per annum. Development activity is supported through cash generated from retained surpluses, from loan finance and from Homes and Communities Agency grants. The Group has worked to make the best of each of these streams:
Clover Road, Chorley - completed October 2013
Beaumont Gardens, Chorley - completed January 2014
Surplus generation The financial surplus generated by the Group’s members on their turnover from social housing activities is amongst the best in the north-west region. Figure 15 compares the Group to the latest available data for other north-west housing associations and shows that in 2012/13 it generated above-trend levels of surplus before interest costs and taxation for every pound received by the business. The Social Impact of Housing Providers, Daniel Fujiwara, HACT, 2013
15
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 15: North-west housing association efficiency
Source: Global Accounts 2012/13, HCA (subsidiary performance consolidated).
In 2013/14 the Group’s surplus before interest costs and taxation improved further, increasing to 41.7% of turnover from 37.8% the previous year and is expected to average 35.8% throughout the Group’s thirty year financial projections .
Loan finance The Group remains an attractive proposition to funders. New lines of funding were secured during the year from The Housing Finance Corporation and from Santander. Further funding from Legal & General was close to being agreed by the year end. Over 90% of debt is fixed and the Group’s weighted average cost of loan finance is 5.3%.
Grant funding Successful bids for grant funding were made to the Homes and Communities Agency in 2013 and in 2014. As a result, all of the Group’s asset-owning members will be active developers in the coming years. This represents a particular milestone for Group member CCH which, having been formed in 2007 to accept and improve local authority housing stock, now moves into a mature phase as a provider of new affordable housing. In total, the Group’s current development plans will leverage £32.8m of secured grant funding to deliver 2,010 units by 2018 as shown in Figure 16.
No loan finance was drawn-down during the year as the Group was able to finance its development commitments of £15m through retained surpluses and grant received from the Homes and Communities Agency. The Group’s members reduced their outstanding loan balances by £2.2m in the year through capital repayments.
Projected SBIT is lower than current performance due to the assumed impact of welfare benefit reform.
16
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 16: Development plans with secured grant to 2018
This represents a 175% increase in annual output on the previous three year period and is expected to move the Group into the top ten of Homes and Communities Agency funded developers despite its size as only the 79th largest as measured by turnover .
New housing development – 2013/14 value for money gains 129 new affordable homes provided. Estimated 261 jobs supported through development work. Estimated £11.1m of value added into the local economy. Estimated £190k pa of social value generated for tenants of new homes. Invested £15m of cash resources to support new build programme. Leveraged grant of £4m to support development in the year. Reduced loan costs through refinancing. Commenced a pilot to test the viability of creating an in -house building arm.
Source: HCA Global Accounts 2012/13 subsidiary performance consolidated to Group level where applicable.
17
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Tenancy services The Group provides a range of tenancy services to the tenants and leaseholders of its member housing associations. 1,434 properties were re-let in the year. Rent lost due to empty properties was 0.8% (2013: 1.5%) due to improved re-let performance. Properties were empty for a median period of 17 days on average compared with 29 days recorded for the previous financial year. The social value generated for tenants from new lettings in the year is estimated to be in excess of £590k.¹ Tenancy services are generally accessed via the Group’s contact centre which resolves more than 75% of all enquiries ‘right first time’. Over 170,000 customer enquiries were answered in this way during 2013/14. The minority of issues that cannot be dealt with by the call centre (typically complex maintenance issues or anti-social behaviour cases) are allocated to specialist teams of staff. This model is extremely effective with 97% of those customers surveyed in the year stating that they were satisfied with the response to their enquiry¹¹.
The Group’s key metric for customer satisfaction, its Net Promoter Score, increased from 43 to 45 on the previous 12 month period. This performance is comparable to some of the nation’s most well-known and respected brands. Figure 17 sets out an analysis of the services requested by customers. Tenancy management 3%
Figure 17: Services requested
Estate management 5%
Payment/payment issues 24%
Repairs 46%
Other 13% Lettings 11%
Requests for property repairs, help with rent issues, lettings and antisocial behaviour account for over eight in ten of all contacts from customers. The Group continues to place a focus on these areas to ensure that its services are effective. Figure 18 shows how the timescale for the delivery of these services has improved in recent years. 18
¹ See p 27 The Social Impact of Housing Providers, Daniel Fujiwara, HACT, 2013 for methodology. ¹¹Source: 7,345 replies to automated surveys undertaken throughout 2013/14.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 18: Service delivery
The speed of delivery of the anti-social behaviour and lettings services has improved markedly since the Group introduced dedicated teams to solely concentrate on these areas in 2011.
The Group’s service delivery model is also economic. Figure 19 shows the latest available data on how the Group’s costs for tenancy services compare with 50 other north-west housing organisations.
Figure 19: Benchmarking tenancy management costs
Source: Housemark, peer group of 50 north-west housing organisations, 2012/13 data
Taken together, the annual cost of tenancy services is £59 per unit less than the median costs of other north-west housing organisations. The main weakness in this area is the higher than median cost of the lettings service. A closer analysis of costs in this area reveals that the Group has typical ‘direct’ (i.e. staffing) costs, but relatively high ‘indirect’ costs.
The indirect costs are associated with the payment of fees to a number of local authority sponsored choice-based lettings schemes which the Group has contractual obligations to support.
19
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Conversely, the Group’s costs for rent arrears & collection and for resident involvement services are relatively low. The Group has invested in technological innovations in both of these areas in recent years to improve the VfM of service provision:
The creation of a web-based tenant consultation system to engage with greater numbers of tenants. This has resulted in better and more timely customer intelligence than previously gained through traditional methods of tenant involvement which focused heavily on meetings.
The adoption of software which analyses payment patterns to calculate the amount of rent arrears owed by tenants themselves rather than from Housing Benefit. This has improved the prioritisation of income recovery efforts.
Further innovations were made in 2013/14 with the Group partnering with a new supplier to the sector to automate all of its early-stage income recovery processes. This has led to a 50% reduction in the staffing of this service whilst working to limit the impact of the government’s welfare benefit reforms as shown in Figure 20.
Figure 20: Rent arrears Introduction of automated arrears process 1200k 1100k
Introduction of under occupation Welfare reform
1000k 900k
Rent Arrears (£)
800k 700
AHA
600 500 400k 300k 200k
CCH
100k 0k
BHA March 2013
June 2013
The key value for money trade-offs that can be made by the Group with regard to the provision of tenancy services are strategic decisions relating to whether services are provided in-house or are out-sourced. The Group’s medium-term strategy is to maintain and develop its in-house call centre based model for service provision providing that value for money continues to be demonstrated. The Group plans to supplement this service with further development of its range of customer selfservice options which will be introduced in 2014/15.
September 2013
December 2013
March 2014
Tenancy services – 2013/14 value for money gains 1,434 lettings were made providing social value of over £590k. Reduction in re-let time and void loss increasing income by £296k. Automated income recovery processes to court stage. 50% reduction in income recovery staff saving £170k per annum. £356k additional income received through affordable rents. Improved options for customer self-service launched.
20
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Housing assets The Group’s housing assets provide the financial platform for the delivery of its social objectives. The Group’s members own and manage 13,043 properties which generated an income of £54.6m¹² against costs of management, maintenance and investment of £34.6m¹³ in 2013/14. In total, the Group’s members have c£250m of capital deployed in their housing assets¹ which are expected to generate an average annual return of 8.7% over the next thirty years¹ . This return is comfortably above the Group’s weighted average cost of loan finance of 5.3%, demonstrating that the asset portfolio as a whole generates a worthwhile financial investment.
Figure 21 summarises the return on capital employed generated by the Group’s housing asset portfolio in the year to 31 March 2014.
Figure 21: Financial return of housing assets 2013/14
Source for National average: Global Accounts 2012/13, HCA
Figure 21 shows that the overall return on capital employed¹ of 9.0% out-performs the sector average of 5.3% recorded for 2012/13¹ . It also indicates that return on capital employed is higher for those Group members with proportionally more general needs housing within their stock holdings. The Group’s better than average return on assets is explained by its better than average operating costs. Low costs are partly the result of the Group’s delivery model for tenancy services (see above) but in the main result from
an economic approach to asset management. Figure 22 shows how the Group’s asset management costs compare with other north-west housing associations. ¹² Net rent receivable and management income, note 3 to the Financial Statements. ¹³ Total expenditure on social housing le ngs and housing management contracts, note 3 to the Financial Statements. ¹ Net of grant received, note 13 to the Financial Statements. ¹ Internal Rate of Return before interest costs. ¹ ROCE calculated as opera ng surplus divided by net book value of housing proper es. ¹ Source: Global Accounts 2012/13, Homes and Communi es Agency (the Group’s equivalent figure for 2012/13 was 8.2%).
21
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 22: Benchmarking the cost of asset management
Source: Housemark, peer group of 50 north-west housing organisations, 2012/13 data
In comparison with other north-west based housing associations, Figure 22 demonstrates that the Group’s costs per unit for asset management are below median levels overall and are far below median levels for major works and cyclical maintenance. Taken together, the Group’s costs for asset management are within the top ten percent of its peer group and £835 per unit lower than the median costs of other north-west housing organisations. Costs are low primarily because the Group’s maintenance services are almost entirely provided in-house. In-house provision enables the Group to save the profit and VAT elements that would otherwise be paid through external procurement (amounting to an estimated 8% saving on VAT alone).
It also allows major maintenance spend to be targeted to individual properties as-and-when needed which is more difficult to achieve through externally procured contracts that tend to package works together on an area-wide basis. Typically, the Group undertakes major maintenance work in empty properties before new tenancies commence. Of course, investment in improving housing assets remains a relatively high-spend area for the Group with £9m¹ invested during 2013/14. Investment principally took the form of decoration to improve the attractiveness of housing available for let and also the upgrade of property components in order to maintain compliance with regulatory and statutory requirements as shown in Figure 23.
Figure 23: Asset component investment 2013/14
Rooflines 400 properties
Windows 221 properties
Internal decoration 311 properties
Heating systems 383 properties
Roofs 141 properties
Bathrooms 113 properties
External decoration 1,308 properties
Fires 201 properties
Kitchens 191 properties
Insulation 204 properties
¹ Source: Expenditure on work to exis ng proper es, note 13 to Financial Statements
22
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
This investment included £1.2m undertaken in the year to ensure that housing assets continue to meet the changing expectations of customers and remain in demand and productive. Investment focused on improving the streetscape of three estates with work to improve fencing,
external cladding and off-street parking; the modernisation of six retirement living schemes; and energy efficiency improvements part-funded by the ECO Homes programme. Figure 24 presents a selection of the improvements made.
Figure 24: Wider asset investment 2013/14
Sherdley Court refurbishments, Manchester
Hibiscus Court refurbishments, Manchester
Data is used to drive decisions about stock investment, disposal or retention. The Group’s strategy is to retain financially ‘unproductive’ housing only in cases where the strategic or social value of retaining those assets is judged to outweigh the financial cost to the business.
Ivy Court refurbishments, Manchester
Harestone Avenue estate improvements, Chorley
This strategy has resulted in an active programme of stock disposals undertaken with the consent of local authority partners. Disposals during the year generated a surplus of £2.5m¹ and included the sale of 66 properties to other housing associations and 47 properties to other buyers as shown in Figure 25.
¹ Source: ‘Surplus on sale of fixed assets’, note 6 to the Financial Statements
23
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Figure 25: Stock disposals 2013/14
The most significant area of disinvestment in the year was in Lower Openshaw, Manchester where Group member, Adactus Housing Association, sold 60 terraced houses to another housing association. Adactus Housing Association has future plans to dispose of approximately 50 units per annum. Capital receipts will be used in support of its housing development programmes.
Housing assets – 2013/14 value for money gains Growth in asset base value of £11m. Estimated savings of £1.2m through in-house delivery of asset management services. Modernisation of six retirement living schemes at a cost of £614k. Street-scape improvements to six estate areas at a cost of £578k. Leveraged £360k of ECO funding for energy improvement works. Disposal of 113 uneconomic properties generating a capital receipt of £6.6m. Commenced £2.8m project to extend head office.
24
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Community investment In 2013/14 the Group’s members expended £436k on initiatives to improve the quality of life of tenants. The social impact of the Group’s community investment activities has been estimated through the Social Value Bank maintained by HACT² . This work indicates that every £1 invested by the Group in community investment activities generates a much greater return for society. Figure 26 provides a summary of the projects funded in 2013/14 that delivered the highest social value. Figure 26: Top ten community investment projects 2013/14 Project
Estimated social value
Key outcomes
One Community One Goal
451 under-25 year-old participants in football
£1.8m
Miles Platting Jobs Club
12 participants found jobs, and 114 participants improved their confidence
£1.3m
Work placements
12 participants found jobs and 44 participants improved their confidence
£446k
Tenant participation
77 people active in tenants groups
£326k
Multi Ability Arts Dance and Drama
60 participants in dance project
£160k
Health and wellbeing days
Helped 80 people keep fit
£148k
Wednesday Walkers
23 participants in walking
£101k
Career guidance
4 participants found jobs and 13 improved their confidence
£142k
The Lesbian and Gay Foundation
48 participants in a regular social club
£72k
Moss Side Community Allotment
60 participants in gardening
£71k
Source for social value estimates: Social Value Bank, HACT
The top ten projects generated an estimated £4.6m of social value in the year.
² Title: Community investment values from the Social Value Bank, Authors: HACT and Daniel Fujiwara (www.hact.org.uk / www.simetrica.co.uk), Source: www.socialvaluebank.org, License: Crea ve Commons A ribu on NonCommercial NoDeriva ves license (h p:// crea vecommons.org/licenses/by nc nd/4.0/deed.en_GB) 25
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
The Group’s flagship initiative in this area is the Neighbourhood Fund – a tenant controlled vehicle for providing financial support to community projects.
In 2013/14 236 projects were supported benefiting people throughout the north-west as shown in Figure 27.
Figure 27: Neighbourhood Fund investment 2013/14
Examples on some of the initiatives supported in 2013/14 are provided in Figure 28. Figure 28: Example Neighbourhood Fund projects
Chorley Moor Fun Day
School children plant a tree at Monsall road housing development
Health and wellbeing days 26
Green and Tidy
Miles Platting Job Club
Weaverham Sports Academy
MADD - The arts partnership
One Community One Goal
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
The Group’s strategic aim is to invest £900,000 in community projects during the three years to 2017. Figure 29 shows the investment planned for 2014/15 and includes new programmes to help fund the recently established
Wigan Youth Zone and also to increase the number of disabled people in employment with the Group through the Supported Employment Programme.
Figure 29: 2014/15 planned community investment
Neighbourhood Fund Chorley Hit Squad Supported Employment programme Environmental Improvements Tenant Welfare Fund Wigan Youth Zone Employment and Skills Green Grants Partnership Leverage Community House Skip Days Enterprise Fund Good Neighbour Competition Garden Competition £0
£20,000
£40,000
£60,000
£80,000
£100,000
£120,000
£140,000
£160,000
£180,000 £200,000
Community investment – 2013/14 value for money gains 236 community projects supported through £194k Neighbourhood Fund spend. Top ten projects generated £4.6m of social value. 26 people helped into full-time employment. 6 people helped into part-time employment. 4 people helped into self-employment. 7 people helped into full-time education or training.
27
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
3
Report of the board The board is pleased to present its report together with the audited Financial Statements of Adactus Housing Group Limited (the Association) for the year ended 31 March 2014. The Association is a member of the Adactus Group Structure (the Group), of which Adactus Housing Group Limited is the parent company.
Employees
Principal activities, business review and future developments
The Group is committed to equal opportunities. Of particular note is its support of disabled people, both in terms of recruitment and also retention of employees who become disabled whilst employed by the Group.
Details of the Group’s principal activities, its performance during the year and factors likely to affect its future development are contained within the Operating and Financial Review which precedes this report.
Board members and executive directors The present board members and those who served throughout the year and executive directors of the Group are set out on page 1. The executive directors are the group chief executive and group directors highlighted on page 1. The senior management team remains unchanged during the year. They hold no interest in the Association's shares and act as executives within the authority delegated by the board. Group insurance policies indemnify board members and officers against liability when acting for the Group and Association.
Service contracts The group chief executive is appointed on an employment contract with 12 months notice and the group directors on an employment contract with six months notice.
Pensions During the year, all of the executive directors were members of the Social Housing Pension Scheme, a defined benefit (final salary) pension scheme. They participated in the scheme on the same terms as other eligible staff and each relevant association within the Group contributed to the scheme on behalf of its employees.
Other benefits The executive directors are entitled to other benefits such as the provision of a car (or car allowance) and health care insurance.
28
The Group recognizes that the success of the business depends on the quality of its managers and staff. It is the policy of the Group and Association that training, career development and promotion opportunities should be available to all employees.
The board is aware of its responsibilities on all matters relating to health and safety. The Group has prepared detailed health and safety policies and provides staff training and education on health and safety matters.
Donations During the year, the Group made no political donations. Any charitable contributions are made within the Group's normal activities.
Financial risk management objectives and policies The Group uses various financial instruments including loans and cash and other items such as rent arrears and trade creditors that derive directly from its operations. The main purpose of these financial instruments is to raise finance for the delivery of the Group’s objectives. The existence of these financial instruments exposes the Group to a number of financial risks. The main risks arising from the Group’s financial instruments are considered by board to be interest rate risk, liquidity risk and credit risk. The board as part of the overall Risk Management Strategy and Treasury Management Strategy reviews and agrees policies for managing each of these risks as summarised below.
Interest rate risk The Group finances its operations through retained surpluses and bank borrowings. exposure to interest rate fluctuations on its managed by the use of both fixed and facilities.
a mixture of The Group’s borrowings is variable rate
Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and invest cash assets safely and wisely.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Credit risk The Group’s principal credit risk relates to tenant rent arrears. This risk is managed by robust recovery procedures, providing support to existing tenants where necessary and the pre-let screening of applicants for tenancies. The Group’s financial inclusion service provides the necessary support to tenants and the Group’s arrears recovery team closely monitors tenant arrears as a whole. The implementation of an automated arrears recovery process ensures that arrears levels are minimized reducing the credit risk. The impending introduction of Universal Credit has been identified as a key risk to the Group and therefore the Group has made a prudent assumption in relation to bad debts in its financial plan and forward budget, to ensure the impact of this risk is more than covered by the financial results of the organization as a whole.
Going Concern 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 twelve months after the date on which the report and Financial Statements are signed. The annual update of the financial and business plan coupled with the available loan facilities in place gives the board reasonable assurance to continue to adopt the going concern basis in the Financial Statements.
Internal Controls Assurance The board acknowledges its overall responsibility 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 assurance against material misstatement or loss. The process for identifying, evaluating and managing the significant risks faced by the Association is on-going and has been in place throughout the period commencing 1 April 2013 up to the date of approval of the report and Financial Statements. Key elements of the control framework include: Formal policies and procedures are in place, including the documentation of key processes and rules for the delegation of authorities. These policies and procedures are reviewed on an agreed cycle. Experienced and suitably qualified staff are responsible for important business functions.
A performance management framework is in place to provide monitoring information to the board and management. Employee progress against agreed, documented objectives is formally reviewed. Management report regularly on their on-going review of risks and how these are managed. Forecasts and budgets are prepared which allow the board and management to monitor financial objectives and risks. Monthly management accounts are prepared promptly with significant variances from budget investigated and accounted for. This reporting includes the monitoring of all loan covenants. All significant new initiatives and projects are subject to formal appraisal and authorization procedures by the appropriate board. An internal audit service is provided by the Group incorporating a team managed by a qualified, full-time employed audit manager. The audit committee approves the audit programme and reviews internal audit reports, reports from management and third-party reviews including reports from tenant scrutiny. The audit committee makes quarterly reports to the board and reviews the assurance procedures, ensuring that an appropriate range of techniques are used to obtain the level of assurance required by the board. The audit committee reviews and approves this statement of the Group and Association's internal controls assurance. Risks are identified, assessed and documented in a risk register with details of how each risk will be managed. The risk register is completed with the approval of the board. Internal audit independently reviews the risk identification procedures and control process implemented by management and reports to the audit committee. The group chief executive also reports to the board on behalf of the senior management team on significant changes in the business and external environment which affect significant risks. The board receives quarterly information on the financial performance together with a summary of key performance indicators covering the main business risks. A fraud register is maintained by the group company secretary and all significant frauds are reported to the audit committee. No significant frauds were reported during 2013/14. Adactus Housing Group has two unregulated subsidiaries, which traded in the year, Palatine Contracts Limited and Acuna Limited. Although not registered providers and not regulated by the Homes and Communities Agency they are both managed and monitored under the same internal control framework as outlined above, specifically:
29
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Directors of the boards include current board members of Adactus Housing Group. The Group’s standard policies/procedures and financial regulations have been adopted into all unregulated subsidiaries. All unregulated subsidiaries are subject to the same financial and internal control scrutiny by both the Group’s internal and external audit functions. The Group’s audit committee carries out an annual scrutiny of the unregulated subsidiaries Financial Statements. There is no detrimental financial risk to the Group should these two unregulated subsidiaries cease operations at any point as the assets exceed the likely debt.
NHF Code of Governance The Group complies with the NHF Code of Governance.
Statement of responsibilities of the board for the report and Financial Statements The board is responsible for preparing the board's Report and Financial Statements in accordance with applicable law and regulations.
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 2012. 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. The board is responsible for the maintenance and integrity of the corporate and financial information included 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. In so far as each of the board members are aware: There is no relevant information needed by the Association's auditors in connection with preparing their report of which the Association’s auditors are unaware. The board members have taken all the steps that they ought to have taken to make themselves aware of any relevant information and to establish that the Association’s auditors are aware of that information.
The Co-operative and Community Benefit Societies Act 2014 requires the board to prepare financial statements for each financial year. Under that law the board have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under the Co-operative and Community Benefit Societies Act 2014 the board 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 and Group for that period.
External auditors
In preparing these Financial Statements, the board is required to:
The annual general meeting will be held on 22nd September 2014 at Turner House, 56 King Street, Leigh WN7 4LJ.
Select suitable accounting policies and then apply them consistently. Make judgments and accounting estimates that are reasonable and prudent.
In line with the Group’s financial regulations, the provision of audit services was tendered during the summer of 2014. KPMG LLP were successful in this tender process. Therefore in accordance with the Co-operative and Community Benefit Societies Act 2014, a resolution to appoint KPMG LLP as external auditors will be proposed at the annual general meeting.
AGM
Approved by the board on 22nd September 2014: Signed on their behalf by:
State whether applicable UK Accounting Standards and the Statement of Recommended Practice: Accounting by Registered Housing Providers Update 2010 (SORP), have been followed, subject to any material departures disclosed and explained in the Financial Statements. Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Association will continue in business.
Alan Cain Chair
30
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Independent auditor's report to the members of the Adactus Housing Group Limited We have audited the Financial Statements of Adactus Housing Group Limited for the year ended 31 March 2014 which comprise Group and Association income and expenditure accounts, the Group and Association statements of total recognised surpluses and deficits, the Group and Association reconciliation of movement in funds, the Group and Association balance sheets 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). This report is made solely to the Association's members, as a body, in accordance with regulations made under sections 87 and 98(7) 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.
4
have been properly prepared in accordance 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 2012.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion: a satisfactory system of control over transactions has not been maintained; or the Association has not kept proper accounting records; the Financial Statements are not in agreement with the books of account; or we have not received all the information and explanations we need for our audit.
Respective responsibilities of the board and auditors As explained more fully in the statement of board's responsibilities as set out on page 30, the board is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices board's Ethical Standards for Auditors.
Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements In our opinion the Financial Statements: give a true and fair view of the state of the Group and Association's affairs as at 31 March 2014 and of the Group and Association’s income and expenditure for the year then ended;
Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Manchester
31
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
5
Financial statements Group income and expenditure account Note
Turnover group and share of joint venture Less: share of joint venture's turnover
2014 £’000
2013 £’000
58,521 (2,728)
56,916 (3,625)
Group turnover
3
55,793
53,291
Cost of sales Operating costs
3 3
(621) (34,894)
(1,644) (33,824)
3,9
20,278
17,823
536
935
20,814
18,758
Group operating surplus Share of operating profit in joint venture Total operating surplus Surplus on sale of fixed assets
6
2,458
1,383
Interest receivable and other income Share of joint venture interest receivable
7
169 1,264
130 1,307
Interest payable and similar charges Share of joint venture interest payable
8
(9,857) (1,600)
(9,866) (1,692)
13,248
10,020
(3) (45)
36 (130)
13,200
9,926
13 46
4 6
13,259
9,936
Surplus on ordinary activities before taxation Taxation on surplus on ordinary activities Share of joint venture taxation
12
Surplus on ordinary activities after taxation 22 22
Transfer from designated reserves Transfer from restricted reserves Surplus for the year after reserve transfers
The accompanying notes form part of these Financial Statements
All amounts relate to continuing activities.
32
A Cain: Chair
The Financial Statements were approved by the board on 22nd September 2014 and signed on its behalf by:
P Lees: Executive member
B Moran: Secretary
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Association income and expenditure account
Note
Turnover
2014 £’000
2013 £’000
21,010
20,469
(12,054) (8,969)
(11,652) (8,833)
(21,023)
(20,485)
(13)
(16)
2
-
(11)
(16)
(3)
27
(14)
11
Operating Costs Staff costs Administration costs
Total operating deficit Interest receivable Deficit on ordinary activities before taxation Taxation
12
(Deficit)/surplus for the year
All amounts relate to continuing activities. The Financial Statements were approved by the board on 22nd September 2014 and signed on its behalf by:
A Cain: Chair
P Lees: Executive member
B Moran: Secretary
33
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Statement of total recognised surpluses and deficits
Group £’000 2014 Surplus/(deficit) for the year Actuarial losses on pension schemes Unrealised loss on re-valuation of investment properties Total recognised surpluses/(deficits) relating to the year
£’000 2013
Association £’000 £’000 2014 2013
13,200
9,926
(14)
11
(614)
(895)
-
-
-
(15)
-
-
12,586
9,016
(14)
11
Reconciliation of movements in Group’s and Association’s funds
Group
Opening funds Total recognised surpluses/(deficits) relating to the year
Closing funds/(deficits)
34
Association £’000 £’000 2014 2013
£’000 2014
£’000 2013
39,360
30,344
10
(1)
12,586
9,016
(14)
11
51,946
39,360
(4)
10
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Group balance sheet Note Fixed assets Housing properties at cost Social housing and other grants Depreciation and impairment
2014 £’000
2013 £’000
489,189 (241,102) (25,672)
478,304 (238,506) (23,089)
13
222,415
216,709
14
8,325
7,898
230,740
224,607
24,047 (24,024)
25,394 (24,920)
230,763
225,081
3,024 4,246 12,690
2,779 4,471 7,876
19,960
15,126
(32,342)
(14,413)
Net current liabilities
(12,382)
713
Total assets less current liabilities
218,381
225,794
Other tangible fixed assets
Investment in joint venture Share of gross assets Share of gross liabilities
15 15
Current assets Properties for sale Debtors: amounts falling due within one year Cash at bank and short term deposits
Creditors: Amounts falling due within one year
16 17
18
Creditors: Amounts falling due after more than one year
18
164,671
185,267
Pension liability
27
1,764
1,167
Capital and reserves Called up share capital Designated reserves Restricted reserves Revaluation reserves Revenue reserves
21 22 22 22 22
3,171 870 47,905
3,184 916 6 35,254
51,946
39,360
218,381
225,794
Consolidated funds
The Financial Statements were approved by the board on 22nd September 2014 and signed on its behalf by:
A Cain: Chair
P Lees: Executive member
The accompanying notes form part of these Financial Statements
B Moran: Secretary
35
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Association balance sheet
Note
Current assets Debtors Cash at bank and short term deposits
17
2014 £’000
2013 £’000 Restated
580 1,128
305 1,174
1,708
1,479
(1,712)
(1,469)
Net current assets
(4)
10
Total assets less current liabilities
(4)
10
Capital and reserves Called up share capital Revenue reserves
(4)
10
Association's funds
(4)
10
(4)
10
Creditors: Amounts falling due within one year
18
The accompanying notes form part of these Financial Statements
The Financial Statements were approved by the board on 22nd September 2014 and signed on its behalf by:
A Cain: Chair 36
P Lees: Executive member
B Moran: Secretary
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Group cash-flow statement
Note
Net cash inflow from operating activities
2013
2014 £’000
24a
£’000
£’000
£’000
22,581
25,644
Returns on investments and servicing of finance 87 (9,912)
Interest received Interest paid Net cash outflow from returns on investments and servicing of finance
71 (9,853) (9,825)
(9,782)
Taxation Corporation tax paid Corporation tax refunded
(3) -
9 (3)
9
Capital expenditure and financial investments Cash paid for construction and purchase of housing properties
(16,782)
(16,241)
3,912
SHG received Proceeds on sales of housing properties Cash paid for other fixed assets
5,326 (1,633)
4,014 3,767 (2,788)
Proceeds on sales of other fixed assets
409
89
Cash inflow before management of liquid resources and financing
(8,768)
(11,159)
7,048
(1,649)
Financing Loans received Loans repaid
Increase/(decrease) in cash and investments
(2,234)
24c
1,491 (7,136) (2,234)
(5,645)
4,814
(3,996)
The accompanying notes form part of these Financial Statements
37
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
1.
Legal status
The Group is registered under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency as a housing provider.
2.
Principal accounting policies
Basis of accounting The Financial Statements of the Group are prepared in accordance with UK Generally Accepted Accounting Principles (UK GAAP) and the Statement of Recommended Practice: Accounting by Registered Social Housing Providers 2010, and comply with the Accounting Direction for Private Registered Providers of Social Housing 2012.
Going concern The Group’s business activities, its current financial position and factors likely to affect its future development are set out within the Operating and Financial Review. 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. 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 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.
Basis of consolidation
properties built for sale and other services at the invoiced value (excluding VAT) of goods and services supplied in the year and revenue grants receivable in the year. Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting. 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 grant funding have been met. Charges for support services are recognised as they fall due under the contractual arrangements with administering authorities.
Deferred taxation The payment of taxation is deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Except as noted below, full provision for deferred taxation is made under the incremental liability method on all timing differences that have arisen, but not reversed by the balance sheet date. In accordance with FRS19, deferred tax is not provided for gains on the sale of non-monetary assets, if the taxable gain will probably be rolled over. Deferred tax is measured at the tax rates which are expected to apply in the periods when the timing differences are expected to reverse, based on tax rates and law enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.
Value Added Tax The Group charges Value Added Tax (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 not recoverable from HM Revenue and Customs.
The Group Financial Statements consolidate the accounts of the Association and its subsidiaries as at 31 March using merger accounting.
Interest payable
Joint Venture Accounting
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
At 31 March 2014, Adactus Housing Association had an investment in a joint venture. On consolidation this has been accounted for under the Gross Equity Method of Accounting for Joint Ventures in accordance with FRS 9.
Turnover and revenue recognition Turnover comprises rental income receivable in the year, income from shared ownership first tranche sales, sales of 38
interest on borrowings specifically financing the development programme after deduction of interest receivable on social housing grant (SHG) in advance; or interest on borrowings 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.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Other interest payable is charged to the income and expenditure account in the year.
Derivatives The Group has used interest rate swaps to reduce its exposure to future increases in the interest rates on floating rate loans. The notional principal is not reflected in the Group’s balance sheet. Payments made under swaps are accrued over the payment period on a straight-line basis and adjusted against interest payable on the loans.
Housing properties Housing properties are principally properties available for rent and are stated at cost less depreciation. Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development period and expenditure incurred in respect of improvements. 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.
SHG is subordinated to the repayment of loans by agreement with the HCA. SHG released on disposal may be repayable but is normally available to be recycled and is credited to a Recycled Capital Grant Fund and included in the balance sheet.
Other grants Other grants are receivable from local authorities and other organisations. Capital grants are utilised to reduce the capital costs of housing properties. Grants in respect of revenue expenditure are credited to the income and expenditure account in the same period as the expenditure to which they relate.
Depreciation of 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 components to its estimated residual value, on a straight line basis, over its useful economic life. Major components are treated as separable assets and depreciated over their expected useful economic lives or the lives of the structure to which they relate, if shorter. The following useful lives have been applied to the Group's components: Structure
100 years
Roofs
80 years
Kitchens
20 years
Doors
30 years
Donated land
Windows
30 years
Land donated by local authorities and others is added to the cost at 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 and 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.
Lifts
25 years
Boilers
15 years
Bathrooms
30 years
Social housing grant Social Housing Grant (SHG) is receivable from the Homes and Communities Agency (the HCA) and formerly from the Housing Corporation and is utilised to reduce the capital costs of housing properties. SHG due from the HCA or received in advance is included as a current asset or liability. SHG received in respect of revenue expenditure is credited to the income and expenditure account in the same period as the expenditure to which it relates.
Freehold land is not depreciated.
Impairment Housing properties, including those with individual components, which are depreciated over a period in excess of 50 years are subject to impairment reviews annually. Other assets are reviewed for impairment if there is an indication that impairment may have incurred. Where there is evidence of impairment, fixed assets are written down to their recoverable amount being the higher of net realisable value or the value in use to the Group. Any such write down is charged to the income and expenditure account. 39
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Other tangible fixed assets
Liquid resources
Tangible fixed assets are stated at cost less accumulated depreciation. Freehold land is not depreciated. Depreciation is charged on a straight-line basis over the expected useful economic lives of the assets at the following rates: -
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.
Land and buildings
3.33% per annum on cost or the length of the lease
Furniture, fixtures and fittings
10% per annum on cost
Office & computer equipment
25% per annum on cost
Motor vehicles
25% per annum on cost
Restricted reserves The Group has a restricted reserve (ie for a specific purpose) for major repairs to supported housing properties. Designated reserves
Investment properties In accordance with SSAP19 investment properties held for long term investment are re-valued annually at open market value as at the balance sheet date. The aggregate surplus or deficit arising on re-valuation is transferred to the re-valuation reserve except where a deficit is deemed to represent a permanent diminution in value, in which case it is charged to the income and expenditure account. No depreciation is charged in respect of investment properties.
Properties for sale
The Group has designated reserves (ie reserves earmarked for a particular purpose) for the provision of furniture and equipment, tenants’ welfare, and planned maintenance.
Pension costs The Group participates in three funded multi-employer defined benefit schemes: the Social Housing Pension Scheme (SHPS), Greater Manchester Pension Schemes (GMPF) and Lancashire County Pension Fund (LCPF). For SHPS, it has not been possible to identify the share of the underlying asset and liabilities belonging to the individual participating employers. The income and expenditure charge represents the employer contribution payable to the scheme for the accounting period.
Shared ownership first tranche sales, completed properties for outright sale and property under construction are valued at the lower of cost and net realisable value. Costs comprise 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.
For the GMPF and LCPF schemes, assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit method and are discounted at appropriate high quality corporate bond rates. The net surplus or deficit adjusted for deferred tax, is presented separately from other net assets on the balance sheet. A net surplus is recognised only to the extent that it is recoverable by the Group.
Leased assets
The current service cost and costs from settlements and curtailments are charged against operating surpluses. Past service costs are spread over the period until the benefit increases vest. Interest on the scheme liabilities and the expected return on scheme assets are included net in other finance costs. Actuarial gains and losses are reported in the statement of total recognised gains and losses.
Rentals payable under operating leases are charged to the income and expenditure account on a straight line basis over the life of the lease term.
Current asset investments Investments are stated at market value. Changes in market value are taken to the re-valuation reserve.
40
The defined benefit schemes were closed to new entrants on 31st December 2009, and from that date the Group operates a defined contribution scheme managed by the Social Housing Pension Scheme (SHPS).
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
3.
Particulars of turnover, operating costs and operating surplus
Group 2014
Note
Social housing lettings
4
Turnover £’000
Operating costs £’000
Cost of sales £’000
Operating surplus £’000
48,355
-
(29,845)
18,510
127
-
(79)
48
6,232
-
(4,772)
1,460
674
(621)
-
53
-
-
(11)
(11)
405
-
(187)
218
55,793
(621)
(34,894)
20,278
Other social housing activities: Supporting people Housing management contracts First tranche shared ownership sales Community and regeneration initiatives Other Total
Group 2013 Note
Operating costs £’000
Cost of sales £’000
Operating surplus £’000
45,330
-
(28,996)
16,334
127
-
(95)
32
Housing management contracts
6,172
-
(4,539)
1,633
First tranche shared ownership sales
1,407
(1,644)
-
(237)
-
-
(46)
(46)
255
-
(148)
107
53,291
(1,644)
(33,824)
17,823
Social housing lettings
4
Turnover £’000
Other social housing activities: Supporting people
Community and regeneration initiatives Other Total The Association’s income relates to the recharge of services provided to its subsidiaries only, and is classified as other social housing activity.
41
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
4. Income and expenditure from social housing lettings (Group) Supported housing & housing for older people £’000
General needs £’000 Rents
Low cost home ownership £’000
Total 2014 £’000
Total 2013 £’000
34,167
6,737
1,748
42,652
39,836
1,575
2,542
283
4,400
3,993
188
1,115
-
1,303
1,501
Net rents receivable
35,930
10,394
2,031
48,355
45,330
Turnover from social housing lettings
35,930
10,394
2,031
48,355
45,330
Management
5,156
766
377
6,299
6,292
Services
1,736
3,290
318
5,344
5,422
Routine maintenance
5,112
662
97
5,871
6,383
Planned maintenance
5,589
363
175
6,127
4,105
Major repairs
708
25
11
744
2,214
Bad debts
445
66
10
521
269
Property lease charges
353
-
-
353
389
2,969
556
98
3,623
3,590
-
-
-
-
110
980
-
(17)
963
222
Operating costs on social housing lettings
23,048
5,728
1,069
29,845
28,996
Operating surplus on social housing lettings
12,882
4,666
962
18,510
16,334
257
69
36
363
659
Service charges Charges for support services
Property asset depreciation Impairment of other current assets Other costs
Rent losses from voids
42
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
5.
Accommodation in ownership and management
Group At the end of the year, accommodation in ownership and management for each class of accommodation was as follows: 2014 No.
2013 No.
General needs
8,693
8,316
Sheltered
1,605
2,104
Supported
458
458
Shared ownership
623
449
11,379
11,327
1,664
1,686
13,043
13,013
Total owned Accommodation managed but owned by others Total owned and managed
Association The Association had no units in management (2013: nil).
6.
Surplus on sale of fixed assets (Group)
2014 £’000 Proceeds Carrying value Capital grant recycled Capital grant written off
2013 £’000
6,642
3,961
(4,232)
(2,506)
(10)
(72)
58
-
2,458
1,383
43
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
7.
Interest receivable and other income (Group)
2014 £’000
2013 £’000
Bank interest receivable
87
71
Other finance income (see note 27)
82
59
169
130
8.
Interest payable and similar charges (Group)
2014 £’000 Loans and bank overdrafts Notional interest on RCGF/ DPF (note 20) Interest payable capitalised on housing properties under construction
The weighted average interest rate on borrowings of 5.30% (2013: 4.6%) was used for calculating capitalised interest.
44
2013 £’000
10,050
10,016
11
17
(204)
(167)
9,857
9,866
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
9.
Surplus on ordinary activities before taxation (Group)
2014 £’000
2013 £’000
Is stated after charging: 3,623
3,588
796
689
-
110
land and buildings
342
366
other
642
643
audit services
44
restated 43
non audit services
24
32
Depreciation on housing properties Depreciation on other tangible fixed assets Impairment of properties held for sale Operating leases
Auditor’s remuneration for:
10. Directors’ emoluments Executive directors The remuneration paid to the group chief executive and directors within the Group was: 2014 £’000
2013 £’000
Emoluments (including pension contributions and benefits in kind)
552
496
Emoluments (excluding employers pension contributions) paid to: The highest paid: group chief executive
146
133
45
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
The full time equivalent number of staff who received emoluments: 2013 No.
2014 No. £60,001 to £80,000
4
4
£80,001 to £100,000
3
5
£100,001 to £120,000
3
1
£120,001 to £140,000
2
2
£140,001 to £160,000
-
1
£161,001 to £180,000
1
-
At 31 March 2014, the group chief executive was a member of the Social Housing Pension Scheme. He was an ordinary member of the pension scheme and no enhanced or special terms applied. The Association does not make any further contribution to an individual pension arrangement for the group chief executive. The emoluments of the highest paid director, the group chief executive, excluding pension contributions, were £146,439 (2013: £133,051).
Non-executive directors Board members of the Association and its subsidiaries received emoluments of £44,769 (2013: Nil) and £1,378 (2013: £2,215) in expenses in the year.
11. Employee information Average monthly number of employees expressed as full time equivalents. 2014 Association No.
2013 Association No. Restated
Group No.
160
162
143
147
14
14
12
12
221
346
233
368
395
522
388
527
Group No. Restated
Employee numbers: Administration Development Housing, support and care
46
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements Employee cost for the above numbers 2014 Association £’000
Group £’000
2013 Association £’000
Group £’000
Employee costs: Wages and salaries
10,600
13,403
10,273
13,106
Social security costs
907
1,099
859
1,052
Other pension costs
547
667
490
615
12,054
15,169
11,622
14,773
The Association's employee numbers and salary costs include amounts recharged from subsidiary entities.
12. Taxation on surplus/ (deficit) on ordinary activities Association 2014 2013 £’000 £’000
Group 2014 £’000
2013 £’000
Analysis of tax charge in year Current year
-
3
-
(6)
Deferred tax
3
(30)
3
(30)
3
(27)
3
(36)
(11)
(16)
13,048
9,469
(3)
(3)
3,001
2,274
Exempt due to charitable status
-
-
(2,999)
(2,300)
Fixed asset differences
-
-
37
-
Expenses / (Income) not deductible / (taxable) for tax purposes
2
(2)
(60)
112
Capital allowances in excess of depreciation
-
-
(28)
(15)
Other short term timing differences
-
25
-
(45)
Marginal relief
-
(2)
-
(2)
Unrelieved tax losses and other deductions arising in the period
1
(7)
51
(7)
Adjustments in respect of prior periods
-
(8)
(2)
(23)
-
3
-
(6)
Surplus/ (deficit) on ordinary activities before tax Tax on profit on ordinary activities at standard rate of 23% (2013: 24%) E ects of:
47
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
13. Tangible fixed assets – housing properties (Group) Completed houses held for letting £’000
Housing properties under construction £’000
Completed shared ownership held for letting £’000
Shared ownership under construction £’000
Total £’000
Cost 430,448
4,147
42,751
958
478,304
10
(1,155)
(94)
(796)
(2,035)
374
14,759
3
1,621
16,757
2,123
-
-
-
2,123
11,082
(11,082)
1,088
(1,088)
-
280
-
(280)
-
-
(718)
-
-
-
(718)
Property disposals
(4,853)
-
(389)
-
(5,242)
At 31 March 2014
438,746
6,669
43,079
695
489,189
212,830
3,014
21,335
1,327
238,506
68
5,097
-
575
5,740
4,231
(4,231)
200
(200)
-
(2,663)
-
(183)
(298)
(3,144)
166
-
(166)
-
-
214,632
3,880
21,186
1,404
241,102
22,390 -
-
699 2
-
23,089 2
-
80
-
3,623
Transfer to current assets
3,543 -
-
(34)
-
(34)
Depreciation eliminated on property disposals
(280)
-
(6)
-
(286)
Depreciation eliminated on component replacements
(722)
-
-
-
(722)
4
-
(4)
-
-
24,935
-
737
-
25,672
At 31 March 2014
199,179
2,789
21,156
(709)
222,415
At 31 March 2013
195,228
1,133
20,717
(369)
216,709
At 1 April 2013 Transfer to current assets Additions Components replaced Schemes completed Reclassification Component disposals
Social housing grant At 1 April 2013 Additions Schemes completed Disposals Reclassification At 31 March 2014 Housing property depreciation and impairment At 1 April 2013 Opening balance adjustment Depreciation charge for year
Reclassification At 31 March 2014 Net book value
48
Development administration costs capitalised in the year totalled £1,011,317 (2013: £920,510). Interest capitalised on development during the year totalled £203,656 (2013: £166,981).
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
All properties are held on either a freehold or long leasehold basis. The Group is unable to analyse this further except at excessive cost.
Expenditure on works to existing properties 2014 £’000
2013 £’000
Improvement works capitalised
2,123
2,528
Amounts charged to the income and expenditure account
6,871
6,319
8,994
8,847
Social housing grant 2013 £’000
2014 £’000 Total accumulated social housing grant received/receivable at 31 March: Capital grant
241,102
238,506
Revenue grant
-
-
241,102
238,506
49
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
14. Other tangible fixed assets (Group) Land and buildings £’000
Investment properties £’000
Furniture and equipment £’000
Motor vehicles £’000
Total £’000
Cost or valuation 300
6,692
4,555
463
12,010
-
1,074
581
53
1,708
-
(76)
-
(76)
(300)
(176)
(9)
(55)
(540)
-
7,590
5,051
461
13,102
At 1 April 2013
-
1,676
2,339
97
4,112
Transfer to current assets
-
-
1
-
1
Charge for the year
-
208
485
102
795
Eliminated on disposals
-
(110)
(7)
(14)
(131)
At 31 March 2014
-
1,774
2,818
185
4,777
Net book value At 31 March 2014
-
5,816
2,233
276
8,325
At 31 March 2013
300
5,016
2,216
366
7,898
At 1 April 2013
Additions Transfer to current assets Disposals At 31 March 2014
-
Depreciation
15. Investments (Group) As at 31 March 2014 the Group (via Adactus Housing Association Limited) held a 33.3% interest in the ordinary share capital of Renaissance Miles Platting Holding Company Limited, a company incorporated in the United Kingdom. Through its wholly owned subsidiary undertaking (Renaissance Miles Platting Limited) Renaissance Miles Platting Holding Company Limited operates a Private Finance Initiative on behalf of Manchester City Council, for
the provision of management and maintenance services and the carrying out of refurbishment to social housing properties, along with the construction of private sector housing, in the Miles Platting area of Manchester. This investment was sold in April 2014 as outlined in note 31. Renaissance Miles Platting Holding Company Limited and Renaissance Miles Platting Limited prepare financial statements to 30 June each year. The Group’s interest in the joint ventures was as follows:
2014 £’000 Share of gross assets Share of gross liabilities
50
2013 £’000
24,047
25,394
(24,024)
(24,920)
23
474
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
16. Properties for sale (Group) 2014 £’000 Housing properties
2013 £’000
2,187
1,852
-
290
837
637
3,024
2,779
Offices Work in progress
17. Debtors Association
Group 2014 £’000
2013 £’000
2014 £’000
2013 £’000 restated
Amounts falling due within one year Rent and service charges receivable
3,195
2,873
-
-
(1,976)
(1,685)
-
-
1,219
1,188
-
-
452
916
260
262
1,341
1,076
110
9
Other taxation and social security
13
311
13
4
Deferred tax
27
30
27
30
1,194
950
170
-
4,246
4,471
580
305
Less: provision for bad and doubtful debts
Prepayments and accrued income Related party debtor
Other
51
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
18. Creditors Association
Group 2014 £’000
2013 £’000
2014 £’000
2013 £’000 restated
Amounts falling due within one year Debt (see note 19)
20,240
1,927
-
-
Trade creditors
1,233
2,424
469
471
Rent and service charges received in advance
2,442
1,582
-
-
Recycled capital grant fund (note 20)
-
22
-
-
Taxation
-
16
-
11
Social housing grant received in advance
511
1,165
-
-
Amounts owed to other group companies
-
-
612
85
448
310
-
-
Accruals and deferred income
5,455
5,293
631
902
Other
2,014
1,674
-
-
32,342
14,413
1,712
1,469
162,349
182,895
-
-
2,322
2,372
-
-
164,671
185,267
-
-
Other taxation and social security
Amounts falling due after more than one year Debt (see note 19) Recycled capital grant and disposal proceeds funds (see note 20)
52
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
19. Debt (Group) 2013 £’000
2014 £’000 Debt repayable by instalments 20,240
1,927
Between one and two years
1,552
20,267
Between two and five years
14,853
8,322
132,244
127,441
168,889
157,957
-
-
3,500
3,500
In five years or more
11,840
24,972
Less: Issue costs
(1,640)
(1,607)
182,589
184,822
Within one year
In five years or more
Debt not repayable by instalments Within one year Between two and five years
Total debt Loans from external funders are secured by fixed charges on individual housing properties. Housing loans are repayable with interest chargeable at varying rates 0.5% to 11.5% during the year.
At 31 March 2014 the Group had undrawn borrowing facilities of £43.7m (2013: £43.7m).
53
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
20. Recycled capital grant and disposal proceeds funds (Group) 2014 Total £’000
2013 Total £’000
RCGF £’000
DPF £’000
At 1 April
2,184
210
2,394
3,553
Grants/proceeds to recycle
1,054
36
1,090
1,320
10
1
11
17
(1,173)
-
(1,173)
(2,496)
2,075
247
2,322
2,394
-
-
-
22
2,075
247
2,322
2,372
2,075
247
2,322
2,394
Interest Grants/proceeds recycled At 31 March Analysed as Due within 1 year Due in more than 1 year
In 2013/2014 £1.2m was drawn from the fund to assist in the development of 10 shared ownership and 29 rented units.
21. Called up share capital (Association) 2014 £
2013 £
Shares of £1 each issued and fully paid At 1 April Issued in the year At 31 March
54
284
284
-
-
284
284
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
22. Reserves Group
Revenue reserves £’000
At 1 April 2013
35,254
3,184
916
6
39,360
Surplus for the year
13,200
-
-
-
13,200
6
-
-
(6)
-
(614)
-
-
-
(614)
59
(13)
(46)
-
-
47,905
3,171
870
-
51,946
Revaluation Actuarial loss Reserve transfers At 31 March 2014
Association
At 1 April 2013
Designated reserves £’000
Restricted reserves £’000
Revaluation reserves £’000
Total reserves £’000
Revenue reserves £’000 10
Surplus for the year
(14)
At 31 March 2014
(4)
55
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
23. Designated reserves (Group) Furniture and equipment £’000 At 1 April 2013
Tenants welfare £’000
Major repairs £’000
2014 £’000
23
23
3,138
3,184
Transfer to designated reserve
-
-
-
-
Transfer to income and expenditure account
-
(13)
-
(13)
23
10
3,138
3,171
At 31 March 2014
24. Notes to the cash-flow statement a. Reconciliation of operating surplus to net cash inflow from operating activities 2013 £’000
2014 £’000 Operating surplus
20,814
18,758
4,420
4,307
65
17
-
-
(245)
1,769
(Increase)/decrease in debtors
225
2,278
Increase/(decrease) in creditors
295
(4,213)
70
(335)
25,644
22,581
Depreciation and amortisation Difference between pension charge and cash contribution Impairment (Increase)/decrease in properties for sale
Share of joint venture surplus Net cash inflow from operating activities
56
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
b. Reconciliation of net cash inflow to movement in net debt 2014 £’000
2013 £’000
Increase/(decrease) in cash in the year
4,814
(3,996)
Change in net debt resulting from cash flows
2,233
5,645
Change in net debt
7,047
1,649
At 1 April
(176,946)
(178,595)
At 31 March
(169,899)
(176,946)
Cash-flows
31 March 2014 £’000
c. Analysis of changes in net debt 1 April 2013 £’000
£’000
7,876
4,814
12,690
Debt due within one year
(1,927)
(18,313)
(20,240)
Debt due after one year
(182,895)
20,546
(162,349)
(176,946)
7,047
(169,899)
Cash investments
57
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
25. Capital commitments (Group) 2014 £’000 Capital expenditure that has been contracted for but has not been provided for in the Financial Statements Capital expenditure that has been authorised by the boards of the subsidiaries but has not been contracted for
The amount contracted for as at 31 March 2014 will be funded from cash resources, grants approved by the Homes and Communities Agency and undrawn loan facilities.
26. VAT Shelter: stock transfer obligations (Group) Immediately prior to entering into a Stock Transfer Agreement between Chorley Borough Council (the Council) and Chorley Community Housing (CCH), the Council contracted with CCH to perform the refurbishment works required to bring the CCH properties to be transferred into an agreed state. At the date of transfer the contract was for an estimated sum equal to the expected cost of the works i.e. £58.3m, (net of VAT). At transfer CCH contracted with the Council to acquire the benefit of the agreed refurbishment works (£58.3m net of VAT- estimated at the date of transfer) plus the housing properties at a price equal to the agreed value of the properties in their unenhanced condition (£2.2m). The nature of the works has been specified in a development agreement and a right of set off exists between the contracts. These contracts have enabled CCH to recover VAT on improvement costs that would otherwise have been expensed. At the time of the transfer CCH paid over a net cash amount of £2.2m to the Council, representing the acquisition of the properties in their unenhanced condition (£2.2m) plus the value of the Council’s obligation to carry out the refurbishment works (£58.3m net of VAT- estimated at the date of transfer), less any amount due to be incurred by CCH under the development agreement in relation to the anticipated cost of the improvements (£58.3m, net of VAT).
58
2013 £’000
76,010
33,171
112,833
41,405
The impact of these two transactions is that whilst the Council has a legal obligation to CCH to complete the refurbishment works, this work has been contracted back to CCH who are also legally obliged. The underlying substance of the transaction is therefore that CCH has acquired the properties in their existing condition at their agreed value, and will complete certain improvements in line with guarantees to tenants. In the opinion of the board, the commercial effect of these transactions when viewed as a whole does not, in practice, create separate assets and liabilities for reporting purposes. Therefore, in accordance with FRS 25 the resulting debit and credit balances, relating to the legal obligation of the Council to complete the refurbishment works for the Association and the equal and opposite legal obligation of CCH to perform the improvement works for the Council, have been offset and are not recorded in the balance sheet. As at 31 March 2014 improvement works to the value of £38.1m have been completed since transfer, net of £5.49m VAT shelter agreement receipts (2013: £38.1m net of £5.49m VAT shelter agreement receipts).
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
27. Pensions (Group and Association) a.
Social Housing Pension Scheme (SHPS)
Adactus Housing Group participates in the Social Housing Pension Scheme (SHPS) defined benefit scheme. SHPS is funded and is contracted out of the state scheme. SHPS is a multi-employer defined benefit scheme. Employer participation in SHPS is subject to adherence with the employer responsibilities and obligations as set out in the “SHPS House Policies and Rules Employer Guide”. The defined benefit scheme was closed to new entrants on 31st December 2009. A defined contribution benefit structure was made available from 1 October 2010. The scheme operated a single benefit structure, final salary with a 1/60th accrual rate until 31 March 2007. From April 2007 there are three benefit structures available, namely: Final salary with a 1/60th accrual rate. Final salary with a 1/70th accrual rate. Career average re-valued earnings (CARE) with a 1/60th accrual rate. From April 2010 there are a further two benefit structures available, namely: Final salary with a 1/80th accrual rate. Career average re-valued earnings (CARE) with a 1/80th accrual rate. An employer can elect to operate different benefit structures for their active members (as at the first day of April in any given year) and their new entrants. An employer can only operate one open benefit structure at any one time. An open benefit structure is one which new entrants are able to join. The Group has elected to operate the final salary with a 1/60th accrual rate, benefit structure for all members in the defined benefit scheme. The trustee commissions an actuarial valuation of the scheme every 3 years. The main purpose of the valuation is to determine the financial position of the scheme in order to determine the level of future contributions required, in respect of each benefit structure, so that the scheme can meet its pension obligations as they fall due. From April 2007 the split of the total contribution rate between member and employer is set at individual employer level, subject to the employer paying no less than 50% of the total contribution rate.
From 1 April 2010 the requirement for employers to pay at least 50% of the total contribution rate no longer applies. The actuarial valuation assesses whether the scheme’s assets at the valuation date are likely to be sufficient to pay the pension benefits accrued by members as at the valuation date. Asset values are calculated by reference to market levels. Accrued pension benefits are valued by discounting expected future benefit payments using a discount rate calculated by reference to the expected future investment returns. During the accounting period, the Group paid contributions at the rate of 11.4%. Member contributions varied between 6.4% and 8.4% depending on their age. As at the balance sheet date there were 121 active members of the scheme employed by the Group. In the year to 31 March 2014, the Group made £859,000 of employer contributions to the scheme. It is not possible in the normal course of events to identify on a consistent and reasonable basis the share of underlying assets and liabilities belonging to individual participating employers. The scheme is a multi-employer scheme where the assets are co-mingled for investment purposes, and benefits are paid from total scheme assets. Accordingly, due to the nature of the scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. The last formal valuation of the scheme was performed as at 30 September 2011 by a professionally qualified actuary using the Projected Unit Method. The market value of the scheme’s assets at the valuation date was £2,062m. The valuation revealed a shortfall of assets compared with the value of liabilities of £1,035m, equivalent to a past service funding level of 67.0%. The scheme actuary has prepared an actuarial report that provides an approximate update on the funding position of the scheme as at 30 September 2013. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The market value of the scheme’s assets at the date of the actuarial report was £2,718m. The actuarial report revealed a shortfall of assets compared with the value of liabilities of £1,151m, equivalent to a past service funding level of 70%.
59
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements The financial assumptions underlying the valuation as at 30 September 2011 were as follows: % pa
Valuation discount rates: Pre-retirement
7.0
Non-pensioner post retirement
4.2
Pensioner post-retirement
4.2 2.5 per annum for 3 years, then 4.4
Pensionable earnings growth
2.9
Price inflation Pension increases: Pre 88 GMP
0.0
Post 88 GMP
2.0
Excess over GMP
2.4
Expenses for death in service insurance, administration and PPF levy are included in the contribution rate. The valuation was carried out using the following demographic assumptions: Mortality pre retirement – 41% SAPS S1 Male / Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for males and 1.25% p.a. for females.
Mortality post retirement – 97% SAPS S1 Male / Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for males and 1.25% p.a. for females. The long-term joint contribution rates that will apply from April 2013 required from employers and members to meet the cost of future benefit accrual were assessed at:
Benefit structure Final salary with a 1/60th accrual rate
Long-term joint contribution rate (% of pensionable salaries) 19.4
Final salary with a 1/70th accrual rate
16.9
Career average re-valued earnings (CARE) with a 1/60th accrual rate
18.1
Final salary with a 1/80th accrual rate
14.8
Career average re-valued earnings (CARE) with a 1/80th accrual rate
14.0
Career average re-valued earnings (CARE) with a 1/120th accrual rate
60
9.7
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
If an actuarial valuation reveals a shortfall of assets compared to liabilities the trustee must prepare a Recovery Plan setting out the steps to be taken to make up the shortfall.
Following consideration of the results of the actuarial valuation it was agreed that the shortfall of £1,035m would be dealt with by the payment of deficit contributions as shown in the table below:
From 1 April 2013 to 30 September 2020
A cash amount(*) equivalent to 7.5% of members’ earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April)
From 1 October 2020 to 30 September 2023
A cash amount(*) equivalent to 3.1% of members’ earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April)
From 1 April 2013 to 30 September 2026
(*) The contributions of 7.5% will be expressed in nominal pound terms (for each employer), increasing each year in line with the Earnings growth assumption used in the 30 September 2008 valuation (i.e. 4.7% per annum). The contributions of 3.1% will be calculated by proportioning the nominal pound payment at the time of the change. Earnings at 30 September 2008 (for each employer) will be used as the reference point for calculating these contributions. These deficit contributions are in addition to the long-term joint contribution rates as set out above. The next formal valuation of the scheme will begin later this year and will give an update on the financial position as at 30 September 2014. The results of this valuation will be available in Spring 2016. Employers that participate in the scheme on a noncontributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). Employers that have closed the defined benefit section of the scheme to new entrants are required to pay an additional employer contribution loading of 2.5% to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into SHPS.
£30,640,000 per annum (payable monthly and increasing by 3% per annum each 1 April; first increase on 1 April 2014)
New employers that do not transfer any past service liabilities to the scheme pay contributions at the on-going future service contribution rate. This rate is reviewed at each valuation and new employers joining the scheme between valuations up until 1 April 2010 do not contribute towards the deficit until two valuations have been completed after their date of joining. New employers joining the scheme after 1 April 2010 will be liable for past service deficit contributions from the valuation following joining. Contribution rates are changed on the 1 April that falls 18 months after the valuation date. A copy of the Recovery Plan, setting out the level of deficit contributions payable and the period for which they will be payable, must be sent to The Pensions Regulator. The Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or Recovery Plan are inappropriate. For example the Regulator could require that the trustee strengthens the actuarial assumptions (which would increase the scheme liabilities and hence impact on the Recovery Plan) or impose a schedule of contributions on the scheme (which would effectively amend the terms of the Recovery Plan). As a result of pension scheme legislation there is a potential debt on the employer that could be levied by the trustee of the scheme. The debt is due in the event of the employer ceasing to participate in the scheme or the scheme winding up.
61
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
The debt for the scheme as a whole is calculated by comparing the liabilities for the scheme (calculated on a buy-out basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the scheme. If the liabilities exceed assets there is a buy-out debt. The leaving employer’s share of the buy-out debt is the proportion of the scheme’s liability attributable to employment with the leaving employer compared to the total amount of the scheme’s liabilities (relating to employment with all the currently participating employers). The leaving employer’s debt therefore includes a share of any ‘orphan’ liabilities in respect of previously participating employers. The amount of the debt therefore depends on many factors including total scheme liabilities, scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time. 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 2013. At this date the estimated employer debt for the Group was £33.7m, and £9.9m for the Association.
The market value of the GMPF’s assets at the last valuation date was £12,590m. The valuation revealed a deficit of assets compared to liabilities of £1,317m. The Group paid contributions at the rate of 16.6% (2013: 15.6%) during the year to 31 March 2014. Member contributions varied between 5.9% and 6.5 %. The employers’ contributions to the GMPF by the Group for the year ended 31 March 2014 were £29,000 (2013: £31,000). The major assumptions used by the actuary in assessing scheme liabilities for FRS 17 purposes as at 31 March 2014 were as follows:
Financial assumptions
31 March 2014 % per annum
31 March 2013 % per annum
Discount rate
4.3
4.5
Expected Return on Assets
5.9
5.1
Future salary increase
3.6
3.6*
b. Pension - Greater Manchester Pension Fund (GMPF)
Future pension increases
2.8
2.8
Adactus Housing Association Limited participates in the Greater Manchester Pension Fund (GMPF). GMPF is a multi -employer defined benefit scheme under the regulations governing the Local Government Pension Scheme. This scheme is funded and is contracted out of the state scheme.
*Salary increase assumed to be 1% p.a. until 31 March 2015 reverting to the long term assumption of 3.6% thereafter.
There is an actuarial valuation of the GMPF every 3 years. The main purpose of the valuation is to determine the financial position of the GMPF in order to determine the level of future contributions required so that the GMPF can meet its pension obligations as they fall due. The last formal valuation of the GMPF was performed at 31 March 2013 by a professionally qualified actuary using the Projected Unit Method.
62
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Mortality assumptions The assumed life expectations on retirement at age 65 are: 2014 Number of years
2013 Number of years
Retiring today: Males
21.4
20.1
Females
24.0
22.9
Males
24.0
22.5
Females
26.6
25.0
Retiring in 20 years:
Expected return on assets The expected returns on assets are: Expected return on assets at: 2013 % pa
2014 % pa
2012 % pa
Equities
6.6
5.7
6.3
Bonds
3.8
3.5
3.9
Property
4.8
3.9
4.4
Cash
3.7
3.0
3.5
63
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Analysis of the amount charged to the income and expenditure account 2013 £’000
2014 £’000 Current service costs
36
34
Amounts charged to operating deficit
36
34
2014 £’000 Expected return on scheme assets
2013 £’000
(76)
(74)
Interest on scheme liabilities
87
79
Amounts credited to other finance income
11
5
118
192
Actual return on scheme assets
Statement of total recognised surplus and deficits 2014 £’000
2013 £’000
Actuarial loss in pension scheme recognised in STRSD
(204)
(103)
Cumulative actuarial loss recognised in STRSD
(528)
(324)
64
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Amounts recognised in the balance sheet 2014 £’000 Present value of funded obligation
2013 £’000
(2,260)
(1,929)
Fair value of scheme assets (bid value)
1,614
1,505
Net liability recognised in balance sheet
(646)
(424)
Reconciliation of deficit 2014 £’000 Opening scheme liabilities Current service cost Past service gain Contribution by employer Net interest income Actuarial loss
2013 £’000
(424)
(313)
(36)
(34)
-
-
29
31
(11)
(5)
(204)
(103)
(646)
(424)
65
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Reconciliation of opening and closing balances of the present value of scheme liabilities 2014 £’000 Opening scheme liabilities
2013 £’000
(1,929)
(1,651)
(36)
(34)
-
-
Contribution by employee
(11)
(13)
Interest cost
(87)
(79)
(246)
(221)
49
69
(2,260)
(1,929)
Current service cost Past service cost
Actuarial losses Benefits paid Closing scheme liabilities
Reconciliation of opening and closing balances of the fair value of scheme assets 2014 £’000 Opening fair value of scheme assets
2013 £’000
1,505
1,338
Expected return on scheme assets
76
74
Actuarial gains
42
118
Contribution by employer
29
31
Contribution by employee
11
13
(49)
(69)
1,614
1,505
Benefits paid Closing fair value of scheme assets
66
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Major categories of plan assets as a percentage of total plan assets 2014 %
2013 %
Equities
72
72
Bonds
17
17
Properties
6
5
Cash
5
6
Amounts for the current and previous four accounting periods
2014 £’000 Present value of scheme liabilities
2013 £’000
2011 £’000
2012 £’000
2010 £’000
(2,260)
(1,929)
(1,651)
(1,580)
(1,466)
Fair value of scheme assets
1,614
1,505
1,338
1,357
1,435
Deficit on scheme
(646)
(424)
(313)
(223)
(31)
Experience adjustment on plan liabilities
(121)
1
(9)
107
-
42
118
(68)
(183)
307
Experience adjustment on plan assets
c.
Lancashire County Pension Fund (LCPF)
Chorley Community Housing Limited participates in the Lancashire County Pension Fund (LCPF). The LCPF is a multiemployer defined benefit scheme under the regulations governing the Local Government Pension Scheme. This scheme is funded and is contracted out of the state scheme. There is an actuarial valuation of the LCPF every 3 years. The main purpose of the valuation is to determine the financial position of the LCPF in order to determine the level of future contributions required so that the LCPF can meet its pension obligations as they fall due.
The last formal valuation of the LCPF was performed at 31 March 2013 by a professionally qualified actuary using the Projected Unit Method. The market value of the LCPF’s assets at the last valuation date was £5,011m. The valuation revealed a deficit of assets compared to liabilities of £1,377m. The employer’s contributions to the LCPF by Chorley Community Housing Limited for the year ended 31 March 2014 were £124,000 (2013: £151,000). The employer’s contribution for the year to 31 March 2014 was 14.1% (2013: 14.1%).
67
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
The major assumptions used by the actuary in assessing scheme liabilities for FRS 17 purposes as at 31 March 2014 were as follows:
Financial assumptions 31st March 2014 % pa
31st March 2013 % pa
Discount rate
4.5
4.2
Future salary increases
3.3
3.3
Future pension increases
2.4
2.4
Mortality assumptions The assumed life expectations on retirement at age 65 are: 2014 No. of years
2013 No. of years
Retiring today Males
22.8
22.1
Females
25.3
24.8
Males
25.0
23.9
Females
27.7
26.9
Retiring in 20 years
68
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Expected return on assets The expected returns on assets are: Expected return on assets at: 2013 % pa
2014 % pa
2012 % pa
Equities
7.0
7.0
7.0
Government bonds
3.4
2.8
3.1
Other bonds
4.3
3.9
4.1
Property
6.2
5.7
6.0
Cash
0.5
0.5
0.5
Other
7.0
7.0
7.0
Analysis of the amount charged to the income and expenditure account 2014 £’000 Current service cost
2013 £’000
182
137
Past service gain
-
-
Curtailments
-
28
182
165
Amounts charged to operating surplus
2014 £’000 Expected return on scheme assets
2013 £’000
(521)
(463)
Interest on scheme liabilities
428
399
Amounts credited to other finance costs
(93)
(64)
Actual return on scheme assets
382
1,236
69
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Statement of total recognised surpluses and deficits 2014 £’000
2013 £’000
Actuarial loss in pension scheme recognised in STRSD
(410)
(792)
Cumulative actuarial loss recognised in STRSD
(359)
51
Amounts recognised in the balance sheet Net pension liability at 31 March 2014 £’000 Present value of funded obligation
2013 £’000
(10,672)
(10,151)
Fair value of scheme assets (bid value)
9,554
9,408
Present value of unfunded obligations
(1,118)
(743)
Unrecognised past service cost
-
-
Related deferred tax asset
-
-
(1,118)
(743)
Net liability
Reconciliation of deficit
2014 £’000
2013 £’000
Opening scheme (liabilities)
(743)
(1)
Current service cost
(182)
(137)
Past service gain
-
-
Curtailments
-
(28)
124
151
93
64
(410)
(792)
(1,118)
(743)
Contributions by employer Net interest income Actuarial loss Closing scheme deficit 70
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Reconciliation of opening and closing balances of the present value of scheme liabilities 2014 £’000 Opening scheme liabilities Current service cost
(10,151)
(8,118)
(182)
(137)
-
(28)
(58)
(60)
(428)
(399)
1
(1,565)
146
156
(10,672)
(10,151)
Curtailments Contributions by employee Interest cost Actuarial gains / (losses) Benefits/transfers paid Closing scheme liabilities
2013 £’000
Reconciliation of opening and closing balances of the fair value of scheme assets 2014 £’000
2013 £’000
9,408
8,117
521
463
(411)
773
Contributions by employer
124
151
Contributions by employee
58
60
Benefits paid
(146)
(156)
Closing fair value of scheme assets
9,554
9,408
Opening fair value of scheme assets Expected return on scheme assets Actuarial gains/(losses)
71
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
Major categories of plan assets as a percentage of total plan assets 2014 % Equities
2013 %
52.4
62.0
Government bonds
3.1
7.9
Other bonds
9.2
17.2
Properties
8.7
9.3
Cash
1.7
3.5
Other
24.9
0.1
28. Related parties During 2013/14 there was one tenant member of the board, P Joyce. His tenancy with CCH was on normal social housing terms and he is unable to use his position to his advantage.
29. Group structure Adactus Housing Group Limited was registered with the Financial Services Authority on 26 June 2002. The Group Structure contains: Adactus Housing Group Limited - a non-charitable parent organisation and registered provider of social housing Adactus Housing Association Limited - a charitable registered provider of social housing Beech Housing Association Limited - a non-charitable registered provider of social housing Chorley Community Housing Limited - a charitable registered provider of social housing Acuna Limited - a private company limited by shares Palatine Contracts Limited - a private company limited by shares.
72
The Association provides core administration, finance, development, management and maintenance services for each of the Group's subsidiaries. All transactions are recharged from the Association under a management agreement at an agreed return on cost. During the year the Association received intra-group payments from Palatine Contracts Limited, a non-regulated entity within the Group, totalling ÂŁ625,950 in respect of administration costs. The board of Adactus Housing Association Limited are trustees of the James Tomkinson Memorial Cottages Trust. In addition, at 31 March 2014, the group chief executive and the group director of finance were directors of Renaissance Miles Platting Limited. This consortium was created to manage the Private Finance Initiative contract with Manchester City Council at Miles Platting.
Adactus Housing Group Limited Report and Financial Statements for the year ended 31 March 2014
Notes to the financial statements
30. Operating leases Operating lease payments amounting to £855,000 (2013: £887,000) are due within one year. The leases to which these amounts relate expire as follows: 2014 Land and buildings £’000 In one year or less
Other £’000
2013 Land and buildings £’000
Other £’000
-
58
-
-
Between one and five years
160
526
133
581
In five years or more
111
-
173
-
271
584
306
581
31. Post balance sheet event
Details of the investment held are set out in note 15 to the Financial Statements.
On 10th April 2014, the Group, through Adactus Housing Association Limited disposed of its interest in Renaissance Miles Platting Holding Company Limited, a company incorporated in the United Kingdom, generating a positive return on its original investment. The results of this transaction will be reported in the Financial Statements for the year ending 31 March 2015.
73