SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES Annual report and financial statements for the year ended 31 March 2016
Registered number: L0078
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Contents
Page Information
3
Strategic Report
5
Board Report
25
Independent auditors’ report
28
Consolidated Statement of Comprehensive Income
30
Association Statement of Comprehensive Income
30
Consolidated Statement of Financial Position
31
Association Statement of Financial Position
31
Consolidated Statement of Changes in Reserves
32
Association Statement of Changes in Reserves
32
Consolidated Statement of Cash Flows
33
Notes to the financial statements
34
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Information BOARD AND OFFICERS CHAIR B Walsh VICE CHAIR M Riley SECRETARY A Stacey OTHER MEMBERS K Chambers B Gayle L Greenwood A Khayum I Norris D Sadler R Royle Z Ahmed P Taylor A Buck CHIEF EXECUTIVE A Stacey FINANCE DIRECTOR R Young HOUSING SERVICES DIRECTOR S Dyett BUSINESS DEVELOPMENT DIRECTOR M Plowden CARE, HEALTH & WELLBEING DIRECTOR J Hall REGISTERED OFFICE 43-47 Wellington Street Sheffield S1 4HF REGISTERED IN ENGLAND UNDER THE CO-OPERATIVE & COMMUNITY BENEFIT SOCIETIES ACT 2014 – REGISTRATION NUMBER REGISTERED UNDER THE HOUSING ACT 1974 20165R HOMES AND COMMUNITIES AGENCY (HCA) REGISTRATION NUMBER L0078
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Information
EXTERNAL AUDITORS Mazars LLP 45 Church Street Birmingham B3 2RT PRINCIPAL SOLICITORS Taylor & Emmet 4-6 Norfolk Row Sheffield S1 1SL PRINCIPAL BANKERS Barclays Bank PLC 2-12 Pinstone Street Sheffield S1 2HN
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report The Board presents its strategic report on the affairs of the Group, together with the financial statements and auditors' report, for the year ended 31 March 2016. South Yorkshire Housing Association (SYHA) has two main business streams: housing for rent and providing care and supported housing. It has in-house design and development teams. SYHA operates mainly in South Yorkshire, with some stock in neighbouring counties. The mix of housing by type of the Group is set out below: 2015 3,774 1,638 306 5,718
General needs Supported housing Shared ownership Total
2014 3,786 1,717 250 5,753
The Association is incorporated under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency (HCA) as a registered provider of social housing. Objectives and strategy for achieving those objectives The Board approved a Strategic Plan in January 2016. It contains five key objectives:
Settle at home: helping people to find, and get established in, a home that works for them LiveWell and realise your potential: providing our customers with services that build their wellbeing and resilience, maximise their income, and improve their chance of getting meaningful work Active asset management: having a focus on the Sheffield City Region, and delivering maximum value from our property and other assets Growth: growing our business through the development of high quality homes, through growth in existing business streams, and by developing new business streams Sustaining our business: providing value for money for our customers, and maximising our profitability to free up resources for investment in our strategic objectives
Our Strategy includes a number of performance indicators which will be used over time to assess its performance against these objectives: Objective
Indicators
Settle at home
Cost of routine property operations Voids, arrears, evictions Tenant satisfaction Apprenticeships, volunteering opportunities created Quality scores
Numbers of new homes provided Receipts from asset sales Delivery of stock investment programmes LiveWell new business won Year on year change in turnover and profit
Customer satisfaction Benchmarking performance Budget performance
LiveWell and realise your potential Active asset management Growth Sustaining our business
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report Business model South Yorkshire Housing Association (SYHA) has two main business streams: providing housing for rent and providing care and supported housing. SYHA operates mainly in South Yorkshire, with some stock in neighbouring counties. SYHA has two active, wholly owned, subsidiaries. SYHA Enterprises is a property sales and lettings business. Alliance Housing is a Registered Provider with 217 properties. SYHA’s housing stock is a mix of new build and refurbished properties, developed since formation in 1972. All stock meets the government’s Decent Homes Standard. Much of SYHA’s income comes, directly or indirectly, from government. Over two thirds of rent is received as housing benefit, and many of its supported housing schemes receive revenue grants from local authorities or health trusts. SYHA is regulated by the Homes and Communities Agency (HCA), with whom it is registered. The HCA issues regulatory judgements on governance and viability. SYHA is rated G1 / V1 - Its highest rating. SYHA is governed by a Board of Management composed of non-executive members. Its operations are managed by a team led by the Chief Executive, along with directors of finance, care and supported housing, housing services, and business development. Development and performance throughout the financial year and position at the end of the financial year Financial performance has been consistent throughout the year, with overall performance above budget in all four quarters. For the financial year as a whole, overall surplus, and surplus individually for both major parts of our business, was ahead of budget. This was largely due to containment of costs. The only material area where performance was below budget was on void losses on some supported housing schemes. We are taking action to address this. Interest cover and gearing covenants are met with a material degree of tolerance. Association Turnover and operating surplus by activity is set out below: 2016
2015 Turnover £’000
2016
2015
Operating surplus £’000
Rented housing
17,574
17,086
5,347
4,882
Supported housing
21,922
24,070
(158)
932
Property developed for sale
3,108
392
309
94
Other
3,279
2,166
1,736
(1,024)
Total
45,883
43,714
7,234
4,884
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report The Board receives regular information on a wide range of performance indicators. Overall, SYHA has improved performance across core housing and support functions in recent years. In the table below, we show data for three commonly used sector performance measures. Indicator
2016
Target
2015
Target
General needs rent arrears (current arrears as % of annual rent)
3.0%
< 4.0%
2.6%
< 4.5%
0.9%
<1.4%
0.9%
<1.4%
86.0%
> 90%
79.0%
> 90%
General needs void rent loss % residents satisfied with repairs service
Future prospects The main factors underlying the development, performance, and position of the Group, and which are likely to affect it in the future are:
The level of rents and any further moves by government to reduce these The level and availability of grant funding for our care and supported housing schemes The impact of the Voluntary Right to Buy scheme the level of interest rates in the future
SYHA prepares a long term Group business plan each year, which is submitted to the HCA as regulator. One objective in doing so is to demonstrate, within the limits of any forecasts, its future financial viability. Our base financial projections show that our business will meet loan covenants, generate cash on core operations, and have capacity to deliver on its corporate objectives. These forecasts are subject to robust stress testing, based on a series of risks and scenarios, including those discussed above. Material adverse conditions would be required to lead to breach of lender covenants.
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report Description of the principal risks and uncertainties being faced The Association prepares and monitors a corporate risk map which sets out the principal risks facing the business. The table below is an extract from the current risk map. Risk
Comments
Cuts in funding / loss of business in care and supported housing
Cuts have been made to the funding for some schemes, and a small number of services have closed. We have reduced costs, and this part of our business remains profitable, but less so than in the past.
Welfare reforms
benefit
A large proportion of SYHA’s income is derived from housing benefit. Reductions in benefits negatively impacts on many of our customers and the consequent ability to pay for our services. To date, we have managed any changes with minimal effect on the business. However, the introduction of Universal Credit, which is paid directly to claimants, poses a threat to income collection. We have provided in our business plan for higher levels of arrears and bad debts.
Expansion of the Right to Buy to housing association tenants
This will have a significant impact across the housing association sector, bringing uncertainty to business planning and cashflows. The government has indicated that associations will be receive the full open market value for properties sold under RTB. However, it will prove challenging to provide replacement properties at the same costs as those sold, and our income and / or profitability could therefore reduce over time. Our business plan assumes a level of RTB sales and development of replacements.
Potential introduction of LHA cap for supported housing rents
The introduction of caps for our supported housing schemes would lead to a very substantial reduction in income, placing the viability of many schemes in doubt. Without mitigation, the worst case outcome would lead to covenant breach in 2019. Its introduction has been delayed for one year whilst the government undertakes a review of the wider funding regime for supported housing.
SYHA needs to ensure that its services continue to meet the needs of clients and service commissioners. In order to do so, we are looking to develop our offer in the wider health and social care market, and have had some success in winning contracts in this market.
Governance The Governance and Financial Viability Standard Having undertaken an internal review, the Group and Association certify compliance with the Governance and Financial Viability Standard issued by the HCA. The Association has adopted the National Housing Federation’s “Code of governance: Promoting board excellence for housing associations (2015 edition)” and confirm that the Group comply fully with the Code. The following are the key methods by which we uphold the principles of good governance: Clear policies and procedures are in place in relation to conduct and probity A clear schedule of Delegated Authorities Board members are subject to annual performance appraisals Financial risk management objectives and policies The Group's activities expose it to a number of financial risks including credit risk, cash flow risk and liquidity risk. The use of financial derivatives is governed by the Group’s policies approved by its Board, which provide written principles on the use of financial derivatives to manage these risks. The Group does not use derivative financial instruments for speculative purposes.
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report Cash flow risk The Group’s activities expose it primarily to the financial risks of changes in interest rates. The Group uses interest rate swaps and other instruments to hedge these exposures. Interest bearing liabilities are held at fixed rate to ensure certainty of cash flows. Credit risk The Group’s principal financial assets are bank balances and cash, rent arrears and other receivables, and investments. The Group’s credit risks are primarily attributable to its rent arrears, and placement on deposit of liquid funds. The amounts for rent arrears presented in the Statement of Financial Position are net of allowances for bad debts. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and large number of tenants. Liquidity risk In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of long-term and short-term debt finance. Going Concern The group’s activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to credit, liquidity and cash flow risk are described in the Strategic Report. The group has considerable financial resources and, as a consequence, the Board believe that the group is well placed to manage its business risks despite current uncertainties in the social housing sector. After making enquiries, the Board has a reasonable expectation that the Association and the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. Value for Money Statement
1. Purpose This Statement is targeted at our customers and our varied stakeholders. It aims to give a rounded selfassessment of SYHA’s performance. A version of the Statement will be published on the SYHA website. 2. The Structure of our Business / Cost Drivers The SYHA group comprises SYHA (the parent organisation) and two active subsidiaries, Alliance Housing Association and SYHA Enterprises. SYHA is a Registered Provider of Social Housing, with two main parts to its business. It owns and manages around 3,800 rented homes, and provides supported housing and care services to over 2,000 customers under its LiveWell brand. SYHA is also a developer of new homes. Group turnover for 2015-16 was £47.2 million. Alliance HA is a charitable RP, managing 217 homes. SYHA Enterprises is a limited company providing property sales and letting services under the Crucible Homes brand. Annual turnover for each organisation is around £1 million.
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report A defining characteristic of SYHA is that a large proportion (around 60% of turnover) of our business is derived from the provision of a wide variety of care and supported housing services. The markets, business dynamics, cost drivers, and asset management issues for this part of our business are often quite different to those for social rented housing. This report will often, therefore, distinguish between these two activities. 3. Our Approach to VFM
3.1. Objectives Our objectives can be summarised as: Using the resources at our disposal in the best possible way to achieve our purpose – in particular creating capacity to build new homes Reducing our costs, enabling us to continue to deliver high quality services, but more efficiently Ensuring our services meet the needs of our customers and service commissioners, and provide good value to the public purse Delivering on VFM allows us to reduce the amount of funding required to provide our services, and to recycle any additional surplus made into developing new homes. 3.2. Framework SYHA has a VFM Framework, approved by its board. The key components of this are:
Our Corporate Plan – updated each year, setting out our high level objectives, and with a focus on delivering VFM Our business plan is updated at least once each year, setting out our medium to long term financial objectives Our annual budget setting process incorporates robust VFM challenges, and has a focus on targeting resources towards priorities set in our Corporate Plan A system of budget setting and budget management which places control and accountability with budget holders right across the business SYStates – a suite of “mini-VFM Statements”, maintained by all key functions in the business, covering cost and quality measures relevant to those functions Regular reporting to the Board on financial performance and a range of operational performance indicators Our Asset Management Strategy – one of five key strands within our Corporate Plan
3.3. Performance Management and Scrutiny We look to bring together the cost and quality of our services to form an overall view on VFM, using tools such as SYStates referred to above. However, we do use a range of methods to manage simply the performance aspects of our services:
Management and board receive a performance report each quarter – covering all areas of our business, giving current and trend performance, benchmarked where this is appropriate, and with commentary from the appropriate manager The outcomes of any material external evaluation of our services are reported to the board – for example, inspections of our services by the Care Quality Commission, and reports received from the Homes and Communities Agency
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report We have an ongoing programme of reviews undertaken by internal auditors, which are considered by our Audit Committee We use a variety of ways to engage with customers, including sharing performance information in our Annual Report to Tenants o We have a customer scrutiny panel, our Challenge Group, which reviews performance and selects areas of our service for review - this group attends board meetings from time to time to report on the findings of this work (most recently they looked at our approach on anti-social behaviour) 4. Delivery against our Strategic Objectives 4.1. Developing New homes Land aside, the cost of building new homes does not vary substantially from one region of the UK to another. However, rents in our region are low when compared to many other parts of the country, and this makes it challenging for us to deliver new homes in a financially viable way. Despite this, we continue to invest resources in order to deliver new homes. In 2015-16, we:
Built or acquired 153 new homes for rent or shared ownership o This represents a 4% expansion of our general needs portfolio in the year (compared to a national average of 2%) and a material increase on the 44 homes we delivered in 201415 A number of these developments are projected to make operating losses, and it is very unlikely that we could commit to these schemes without the operating efficiencies we are making. We signed a deal with an investor which will deliver 215 homes in the Sheffield City Region over the next 3 years
Looking forward, our relatively high level of gearing, and challenges in delivering financially viable developments, limits our ability to deliver new homes. However, we continually look to maximise this output, and to look at innovative ways we can work with others to increase supply. The table below sets out our targets for new homes over the next five years, including numbers we already have in our pipeline. Our aim will be to replace any homes sold under Voluntary Right to Buy on a one-for-one basis. Funding SYHA funded
Sub total Funded by others Total
Strand within programme Growth (supported with grant and market-facing products) VRTB replacements
New homes secured 101
New homes to be secured 170
Total
51
139
190
Manage & maintain
219
500
461 719
371
809
1180
271
4.2. Providing Affordable Rented Homes For the 3,774 social rented homes we provide, on average, our rents are 21% below those charged in the private rented sector. We provide a comprehensive management and maintenance service, which goes beyond that typical in the private rented sector. We dedicate resources to tackling anti-social behaviour, offering debt advice, and supporting community initiatives. All of our homes exceed the Decent Homes Standard. We have chosen not to move properties to higher “Affordable Rents” as part of our HCA development agreement, minimising rents payable by our customers, and thus limiting any call on housing benefit. 11
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 4.3. Outcomes from our LiveWell Services Many of our care and supported housing services provide support to vulnerable clients, and there is much research which shows that these types of services reduce the potential burden on public services such as local authorities, police, and health services. We set out some specific examples from our own services below. Our LiveWell services currently support 2,742 people with health, social care and housing needs. This compares to 1,872 in 2013, and this increase has been achieved despite material reductions in the Supporting People funding received for these services. We provide 396 units of extra care provision, enabling older people to remain in their own home for longer, thereby avoiding residential care. Research found that an average 60 unit extra care scheme delivers savings to the social care system of £326,000 per annum (Establishing the extra in Extra Care ILC- UK). Extrapolating from this, our 284 rented Extra-Care homes give a saving of £1,543,000 per annum. 299 people use our mental health services. We deliver a range of services which prevent admission to residential care and hospital or enable people to leave hospital more quickly. The Department of Health estimate that delaying admission to residential care though offering supported housing saves £28,080 per person per annum. Our 97 units of supported accommodation for homeless families enable vulnerable families to stabilise whilst seeking a permanent home. We support these families to manage their finances, housing needs, and to manage their health and wellbeing. 4.4. Innovation in Health and Social Care A key part of our strategy for LiveWell is to identify areas where we can deliver savings for the health and social care system by offering services which prevent people from having to access more costly health interventions. Some examples of our recent work are: Doncaster Social Prescribing: a project that gives healthcare professionals in Doncaster the option to prescribe non-medical support to patients, which aims to reduce unnecessary GP appointments and hospital admissions. Last year, we worked with 985 people to reduce their use of primary and secondary health services. Research by Sheffield Hallam University into a social prescribing service indicated that the average cost saving to the health system from social prescribing was £378 per person. Using this measure we estimate our service saved local health services £372,330 last year. Living Well: a project run in partnership with our local Health and Social Care Trust. It enables people placed in out of city hospitals or treatment units to return to Sheffield and live in the community. This year we supported 24 people to leave hospital and live independently. Their use of acute hospital beds reduced from 100% to 3% in this period. Using even prudent estimates, this service has delivered over £1 million savings to the local health economy. Ageing Better: a project funded by the National Lottery. This tackles the issue of social isolation and loneliness in people over 50, which leads to negative impacts on health. This year, we supported 756 people, delivering a range of interventions from home based counselling to peer mentoring. The impact is being evaluated locally by Sheffield Hallam University, and nationally by Ecorys.
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 4.5. Social Value Volunteering: We set ourselves a challenging target of delivering 5,000 hours of volunteering per annum, and achieved 6,332 hours. The ONS uses a median hourly wage to value this type of work, and using this measure the value of our programme was £79,150. Taken together, the estimated value to the public purse of the examples above is £3,022,560 per annum. The cost of providing the support in these services is just £359,000 each year. 5. Efficiency and Cost Reduction 5.1. Overview This section explains the ways in which we are looking to reduce costs, sets out how costs have reduced in 2015-16, and gives examples of VFM. We look to reduce costs in a number of ways right across the business, but there are 4 areas we would highlight: Investment in IT to bring about efficiencies and reduce staffing costs Insourcing further elements of maintenance services Procurement savings on goods and services we purchase Systematic redesign of processes We have made substantial savings in recent years, and we are seeing the number of “big ticket” items, which deliver relatively quick and easy savings, diminish. Increasingly, the actions we are taking result in relatively modest savings in any one area, but which are material when aggregated across the business. This is evidenced by the reduction in core operating costs we have achieved, which is illustrated in the chart below.
Total Costs per unit (£) Actual
1200
Forecast
1100 1000
948
955
1060 935
900 800
880 850
856
812 738
844
700 600
698
690
2016/17
2017/18
500 400 2013/14 Management
2014/15 Routine maintenance
2015/16
Management (HCA)
Maintenance (HCA)
Our total cost per unit for housing management in general needs housing was £844 in 2015-16, a reduction of £12 on the previous year (equivalent to £49,000). For context, we show the average cost published by the HCA, which is £880. Our routine maintenance (this comprises of responsive repairs, void works and cyclical maintenance) cost per unit is £935, a reduction of £20 per unit (equivalent to £80,000). The HCA published average is £1,060 per unit. 13
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 5.2. Examples of VFM Gains in 2015-16 As mentioned above, the pattern of our savings now tends to be one of smaller savings across a number of areas. These are examples of year-on-year savings in 2015-16:
Staffing costs in our rents team were reduced by £30,000 Flooring procurement – further savings of £22,300 per annum Savings on gas & electricity costs of £30,000 Moving to electronic tenants newsletter saving £17,325 Using e-learning to deliver health & safety training saving £15,000 A further reduction in IT network costs saving £7,610
5.3. Examples of VFM Gains over Longer Periods
In October 2015 we undertook a review which shows that our investment in a range of IT enhancements has already, or will, reduce annual operating costs by at least £317,000 per annum Over the past three years, we have restructured our marketing function, insourcing various activities and attracting grants to support some of our wider social value initiatives o As a result, our net annual marketing costs have fallen by £31,000 (to £145,000) in 2015-16, and will fall by a further £42,000 in 2016-17
6. Benchmarking 6.1. Our Approach to Benchmarking Benchmarking the costs and quality of our services against similar organisations is a key part of assessing the relative cost and quality of the services we provide. We set out below the context and rationale for our work on benchmarking. LiveWell SYHA derives around 60% of its income from the provision of care and supported housing (LiveWell) services. This is a competitive market, where we have to compete to win or retain contracts. We will only do this if we are able to clearly demonstrate that we deliver value for money. With this constant driver to deliver VFM, allied to the fact that we provide a very wide variety of services, we see little value in general high level benchmarking against peers. Our approach is to undertake more targeted work:
Regular market research to ensure our service offers remain fit for purpose Conducting competitor analysis for specific contracts, looking at price and quality Analysing feedback on tender submissions Carrying out an annual ‘health check’ assessment on all care and support services Using data to evidence the preventative or social benefits of our services
General Needs Our general needs housing service lends itself much more readily to benchmarking against other social housing providers. SYHA subscribes to HouseMark, the most commonly used benchmarking service in our sector. We compare ourselves to a peer group consisting of similar social landlords in the North & Midlands. SYHA also uses HouseMark to benchmark its overhead costs.
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 6.2. HouseMark Benchmarking – General Needs Housing & Overheads The information below derives from Housemark data for financial year 2015-16. 6.2.1.Maintenance The charts below plot direct maintenance costs - that is excluding all overhead and ancillary costs. The first of the charts combines all elements of maintenance. The second excludes major works, as this spend can fluctuate form one period the next. The third shows just major works.
Maintenance Costs
1,800
Direct Cost Per Property (£)
1,600
259
1,400 225 1,200
216 230
179 227
186 175 Void Works
1,000 800
646
590
Cyclical Maint.
687 823
600
Major Works Responsive Repairs
400 200
547
545
537
2014/15
2015/16
363
0 2013/14
Median
Maintenance Costs (excl. Major Repairs)
1,200
Direct Cost Per Property (£)
1,000 259
216
225
230
800 600
179 227
186
Void Works Cyclical Maint.
175
400 547
545
Responsive Repairs
537
200
363
0 2013/14
2014/15
2015/16
Median
15
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 900
Major Repairs
Direct Cost Per Property (ÂŁ)
800 700 600 500 823
400 300
646
Major Works
687
590
200 100 0 2013/14
2014/15
2015/16
Median
We have reduced the cost per unit of void works, cyclical maintenance and responsive repairs in 2015-16. On void works, we have improved processes, refining the type of works undertaken and driving out inefficiencies with contractors. This helped us to reduced average costs by ÂŁ37 per unit (equivalent to ÂŁ13,000). All of this has not had an adverse impact on our ability to let properties, as evidenced by our sustained performance on void rent loss. We made a slight reduction on cyclical spend, but our costs remain above the median. Gas servicing is the biggest element in this and our performance is routinely at 100%. We have reduced responsive repair costs slightly, but our spend is above the median and has been for some time. There is a link here between the amount we spend on major works, which is well below the median for our peer group. We have undertaken analysis to understand the reasons for this. Our view is that there is no inherently correct balance of spend, but we will continue to review this. We have embarked on a major insourcing project which will achieve further savings over the next 3 years. The following are the key performance indicators we monitor in relation to maintenance: M e asure
SY HA 2 0 1 5
SY HA 2 0 1 6
Pe e r Gro up Ave rage
DSO repairs completed on first visit
89.29%
89.49%
87.81%
Calendar days to complete a responsive repair
6.3
10.1
7.8
Customer satisfaction with day-to-day repairs
79.0%
86.0%
86.5%
Properties meeting Decent Homes Standard
100%
100%
N/A
Properties with valid gas safety certficate
100%
100%
99.95%
The number of calendar days taken to complete a responsive repair increased to 10.1 from 6.3. This increase is the result of a mid-year termination of a large external contract, which did adversely impact on performance. This has been addressed, and we expect to see a marked improvement in 2016-17. Overall, our summary is that our total repair costs are slightly above those for our peers, with our performance (aside from the blip in days taken to complete repairs this year) being slightly better overall than our peer group.
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SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 6.2.2.Housing Management
Housing Management Costs
400
Direct Cost Per Property (£)
350 300
82 74
250
51
200
46
150
44
39 52 29
78 40 52 22
100 50
132
133
124
75
Tenancy Management Lettings
44
ASB
36
Resident Involvement
52
Rent Arrears & Collection
86
0 2013/14 2014/15 2015/16
Median
The chart above plots direct housing management cost per property. This excludes all overheads and ancillary costs of providing these services. We have reduced our total cost per unit by £39 since 2013-14, this equates to savings of around £145,000 per year. However, at £316 per unit, it is higher than the £293 per unit median for our peer group. Analysis published by the HCA cites a number of factors which contribute to variances in operating costs, two of which are lower earnings levels and social deprivation. SYHA operates in a region with lower than average earnings. Of the areas within the Sheffield City Region, our main area of operation, 17% are in the 10% most deprived areas nationally. The areas of spend where we are above the median are ASB and rent collection, where we have targeted resources to ensure we minimise rent arrears and maximise our impact on neighbourhoods. The impacts can be seen in our arrears collection performance and our low levels of evictions. We will continue to look for efficiencies, but believe that these factors add to our costs. The following are the performance outcomes relating to housing management: M easure
SY HA 2 0 1 5
SY HA 2 0 1 6
Peer Group Average
Current rent arrears
2.40%
3.08%
3.46%
Number of evictions
27
25
N/A
Void rent loss
0.83%
0.83%
0.83%
Satisfaction with anti-social behoviour cases
91%
89%
87%
At 31 March 2016, our current rent arrears were 3.08%, up from 2.4% at March 2015. However, the 2.4% figure was artificially low due to a timing technicality. The overall trend remains downwards – arrears stood at 4.7% in 2010 – and our figure is below the peer group median. Our summary is that our performance is better than average for our peer group. Although our costs are slightly higher, this is influenced by the areas in which we work. 17
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 6.2.3.Overheads We use Housemark to benchmark our overhead costs. This indicates that our overhead costs overall are comparatively low, being in the top quartile (i.e. lowest cost) in our peer group. The diagram below shows position in relation to our peers, using % of direct revenue costs as the measure. Overall overheads for SYHA are 9.2% of turnover compared to a median for the peer group of 12.65%. They are below the peer group average in all areas except IT, where they precisely on the group average. We have invested quite heavily in technology to support front line services, and we may see that our IT costs increase further in the coming years. As we comment elsewhere, this investment has led to productivity and efficiency improvements.
Overhead costs as % of adjusted turnover 14 12
2.94
10 8
2.76
2.30
2.94
5.75
6 4 2 0
4.08
4.61
0.76 1.17
0.81 1.28
0.91 1.20
2.34
2013/14 (%)
2014/15 (%)
2015/16 (%)
Median 15/16
Finance
Office Premises
4.15
Central & Other
1.62
IT & Communications
7. Asset Management & Return on Assets Active Asset Management is one of five core strategies within our overall Corporate Plan. We aim to derive maximum value from our property assets by investing in maintenance, or through a change of use or disposal where this is appropriate. In this way, we provide our customers with quality homes and neighbourhoods, or release capital for investment in the providing new homes. 7.1. Understanding our Assets / Our Strategic Position SYHA’s stock profile is diverse, comprising: 1,638 properties where we provide care or support – a mix of self-contained homes and specialist properties such as extra-care schemes or residential care homes 3,774 social rented properties – a mixture of houses and flats, dispersed across our area of operation, and generally with small numbers in any one location 306 shared ownership homes
18
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report Broadly, for our care and supported housing properties, we regard the social value, delivered through the care and support services provided, as more important than maximising financial return using conventional asset management metrics. This does not mean that we ignore the financial aspects of the return on these assets, but this is secondary to fulfilling their role in providing services for our communities. Our approach on social rented housing is slightly different. We regard the maximisation of the overall number of quality homes in our region as a key objective. This means that we are likely to give more weighting to the financial performance of these properties when making asset management decisions, in order to maximise the amount available to develop new homes. For shared ownership properties, our objective is to operate at a surplus, whilst enabling our customers to maintain or increase their equity stake.
7.2. Our Decision Making & Use of Data We use the principles set out above, using data referred to elsewhere in this section, to support decisions on: Where to invest resources in developing new homes Where to invest resources in major repair and improvement works – including energy efficiency measures How we can target investment to improve neighbourhoods Where and when to dispose of properties Every void property is reviewed to determine whether to re-let, sell or change to an alternative use. Whilst the majority of properties are re-let we will consider the disposal of a property when the following circumstances exist: It has high void repair costs and / or high maintenance costs There is low demand It is in an area we have decided to exit or where we’re working to change the tenure mix Sale will generate a high capital receipt to invest in providing new homes 7.3. High Level Performance of our Assets Because we develop and invest in our property assets largely to achieve social purposes – and are funded to do so - we cannot be driven solely by conventional financial performance metrics. This is particularly true for supported housing. For example, we may (and do) choose to retain properties which offer a lower return, where we feel that investment in a particular neighbourhood, property type or service is justified. Similarly, we may dispose of properties which perform well financially, if the capital receipt can be used to increase the overall number of homes in our region. Notwithstanding these points, we use various metrics to inform our choices. The table below shows the Return on Capital Employed (ROCE) for our three main categories of properties. This measures the profit made for three categories of properties, expressed as a percentage of the net amount we have invested in them. The average ROCE for our assets is 6.8%, and the cost of the capital for year ended 31 March 2016 is 2.5%. The primary purpose of this data is to indicate the relative, rather than absolute, performance of these categories of assets.
19
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report
General Needs
LiveWell
228,265 96,156 132,109 8,792 6.7%
86,662 52,275 34,387 2,513 7.3%
Cost £000 SHG £000 Capital employed £000 Profit exc interest + prop dep £000 Return on capital employed Average cost of capital 2015-16
Shared ownership 14,013 6,956 7,057 457 6.5%
Total 328,940 155,387 173,553 11,762 6.8%
2.5%
7.4. Measuring Value in Our Portfolio We undertake analysis on the performance of our social rented property portfolio each year. We measure financial value, and use a range of housing and neighbourhood performance indicators - these include demand, customer satisfaction measures, and deprivation. From this analysis, we measure:
Financial performance – using net present value (NPV) Social housing value – using a scoring system, this combines NPV with housing and neighbourhood indicators to give a rounded measure of performance
An extract from a traffic light report showing this data by neighbourhood is set out below.
Neighbourhood
Inside SCR 2015 NPV Abbeydale & Netheredge Inside £ 47,715 Aldersgate Court Inside £ 15,389 Ashover and surrounding Inside £ 34,788 Auckley Inside £ 26,807 Balby Inside £ 32,933 Barlborough Inside £ 35,618 Barnsley Centre Inside £ 19,742 Beighton & Mosborough Inside £ 73,279 Bentley Inside £ 31,165 Bolsover Borders £ 21,323 Bramley Inside £ 61,999 Brimmington, Hollingwood & Sta Inside £ 31,139 Broomhall Inside £ 21,699 Canklow Inside £ 40,173 Cantley Inside £ 56,975 Carlton Outside £ 41,597 Chapeltown Inside £ 29,689 Chesterfield Central Inside £ 18,836 City Road Inside £ 55,730 Clifton Inside £ 4,527 Crookes, Crookesmoor & Broomhi Inside £ 30,250
Difference %
N/a
Difference £
-3.70% -£ 1,701.78 0.33% £ 50.44 -10.78% -£ 3,385.21 -10.99% -£ 2,653.88 19.61% £ 8,033.47 N/a 17.04% £ 4,054.57 -5.81% -£ 4,024.08 5.34% £ 1,759.17 18.72% £ 4,911.22 -0.04% -£ 25.34 16.36% £ 6,089.19 17.90% £ 4,730.71 6.56% £ 2,818.95 2.58% £ 1,509.65 -4.60% -£ 1,827.52 -6.01% -£ 1,682.97 18.38% £ 4,241.06 -9.14% -£ 4,667.29 72.25% £ 11,783.54 12.61% £ 4,366.33
2016 NPV £ 46,013 £ 15,440 £ 31,403 £ 24,153 £ 40,966 N/a £ 23,797 £ 69,255 £ 32,924 £ 26,234 £ 61,973 £ 37,228 £ 26,429 £ 42,992 £ 58,485 £ 39,769 £ 28,006 £ 23,077 £ 51,063 £ 16,310 £ 34,616
20
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report Although this is not an exact science, we use this data to indicate whether our asset management strategy and decisions are having the intended impact. For example, if we are investing heavily in a particular neighbourhood, we would expect to see a positive impact on these indicators over time. In financial terms, we use the net present value (NPV) as our indicator of performance. We do not have an intrinsic objective of increasing NPV, and it can be affected by factors beyond the control of asset management actions. For example, we must decrease rents in future, which will reduce the return on our assets. However, we aim to use this data to indicate whether our asset management decisions are having the impact we would expect. For 2015-16, we have continued to dispose of properties with higher repairing liabilities. All other things being equal, we would expect this to evidence itself by increasing the NPV of our portfolio. It should also reduce the number of poorly performing properties within the portfolio. For last year (2014-15), the average NPV per unit was £31,658. For this year (2015-16), applying 1% rent reductions will see the average NPV per unit fall to £31,080. We also ran our analysis using the same rent assumptions as last year, to give an indication of underlying impact excluding the effect of rent reductions. Doing so, the average NPV per unit has increased to £34,620. The charts below show the proportion of our portfolio in bands of NPV per unit, green being over £30,000, amber between £10,000 and £30,000, and red being below £10,000. As we would expect from our disposals policy, the proportion of properties in the red band has fallen.
2016 NPV without Rent Reductions
2015 NPV Red 483 13%
Red 320 9%
Amber 947 26%
Amber 1055 28% Green 2244 61%
Green 2354 63%
Turning to the Social Value measure, the charts below show our portfolio in scoring bands, green being highest and red lowest. As you can see from the charts below, eliminating the impact of rent reductions, we have substantially reduced the number of properties within the lowest performing band.
2016 SHV (without Rent Reductions)
2015 SHV Red 636 17%
Green 807 22%
Red 1084 29%
Green 1622 44%
Amber 1471 39%
Amber 1783 49%
21
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 7.5. Using Receipts from Property Disposals A summary of property disposals over the past three years is set out below. In aggregate, we have brought in £9.21 million, with the largest share of these disposals being of older properties with high repairing liabilities. Our actions reduce future costs, and this can be seen in the increase in the overall net present value of our portfolio. All of the receipts from disposals are recycled to provide additional new housing. This is part of the reason we have been able to increase our development activity in 2015-16, and have created capacity to develop new homes in future.
2013/14
2014/15
2015/16
79
23
30
132
Sales receipts (£000)
5,220
1,614
2,376
9,210
Surplus (£000)
2,184
696
893
3,773
Disposals (units)
8.
3-year total
Delivering Value for Money in the Future
Our overall aim is to maintain the quality of our services whilst reducing the cost of delivering them. 8.1. Efficiency The introduction of rent decreases in particular led us to undertake a fundamental review of our business, and led to a reworking our business plan in October 2015. Mainly through a continuation of initiatives already underway - such as investment in IT, insourcing, and system reviews - we developed a schedule of specific actions which will reduce operating costs by a total of £1.68 million per annum by financial year 2018-19. £1.1 million of this is planned to take effect in 2016-17. We also agreed a number of principles to which we will adhere in improving our VFM:
We will continue to grow and develop profitable new services – our “growth engines” should not be materially damaged Remaining resources should be sufficient to safeguard revenue streams -customer satisfaction may fall from its current level of over 90%, but will not be allowed to fall to levels which lead us to question our ability to provide good quality services Our jobs should continue to be sustainable and worthwhile - we are not moving to a high stress, factory farm model We must continue to be able to add value to customers’ lives, to local infrastructure and to local neighbourhoods - if this cannot be delivered, it will be time for us to consider other options
Some of the actions in the “savings schedule” referred to above began to take effect in 2015-16, and played a part in helping us to reduce our operating cost per unit. Most of these actions, though, will impact in 2016-17 and through to 2018-19. The chart below shows how our core management and repairs cost per unit (this is the total cost including all overheads and ancillary costs) has actually reduced, and how this will reduce further with the implementation of our plans.
22
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report Total Costs per unit (£) 1200 1100 1000
955
948
1060 935
900 800
880 856
850
812 738
844
700 600
698
690
2016/17
2017/18
500 400 2013/14 Management
2014/15 Routine maintenance
2015/16
Management (HCA)
Maintenance (HCA)
These are examples of actions we are taking and the projected impact over three years:
Enhanced use of technology – we will make net productivity gains of £172,000 through a series of projects under our “Modernising Customer and Business Services” initiative – these include rolling out ‘mobile working’ to more front line staff, implementing electronic document management across the business, and automating maintenance invoicing systems Insourcing: o We have made savings already, and will expand the range of repairs undertaken by our in-house team to make further savings of £519,000 o We will create a larger in-house pool of temporary staff in LiveWell, saving £51,000 per annum on agency cover arrangements Procurement – for 2016-17, savings will include: o £98,000 on insurances o £25,000 on telephony We have introduced “salary exchange” for pensions, which will save £34,000 per annum in national insurance costs We will bid for grants to cover the cost of “value added” activities we currently pay for ourselves (e.g. volunteering), our target is to bring in £50,000 per annum
8.2. Delivering New Homes Our target for delivery of new homes is set out in Section 4 Above. 8.3. Asset Management We will continue to apply our processes in accordance with our Asset Management Strategy and the principles outlined above. This should both improve the financial performance of our portfolio over time, and provide resources to recycle into providing additional housing supply. We will continue to regularly review the social and financial performance of our LiveWell assets, and we will dispose of these where their performance is lacking against both measures. We have already taken the decision to dispose of one scheme and this will be completed in 2016-17.
23
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Strategic Report 9. Overall Self-Assessment The assessment below aims to give a fair and rounded picture of VFM within SYHA. We believe that we continue to deliver against our key corporate objectives, and continue to improve the value we deliver year-on-year o In particular, we are working hard to develop new services which both reduce costs and improve outcomes in health and social care The competitive nature of the market for our LiveWell services means that we will only win or retain business where we demonstrate that we provide VFM o We have reduced costs substantially, will continue to look for efficiencies and to develop new and more efficient services, but the scope for further efficiencies is limited o We aim to further increase revenues derived from new funding sources, to support our core infrastructure costs We have reduced our social rented housing operating costs, and as indicated by our projected costs per unit, we will reduce these further in the next two years Benchmarking for our social rented housing indicates that, overall, our operating costs are just above the average for our peers, and we deliver a level of service which is above that provided by our peers o Our aim is to maintain performance whilst continuing to invest in value added services and reducing costs o In quality terms, we will focus on any areas where our performance falls below average compared to our peer group We have improved the quality of data we hold on our property assets, and use this systematically to inform our decision making o We have disposed of properties, which has improved the financial performance of our portfolio o Receipts from disposals is recycled into the provision of new homes, and we have increased the number of extra homes we have provided
We have made gains in procurement, but intend to explore ways to make further savings, either by working with other organisations, increasing internal resources, or using collective procurement vehicles
Insourcing of services has proved to bring material cost reductions, and we aim to continue this process – within our capacity to manage this We have increased the number of new homes we have delivered o Relative to our size, we have ambitious plans for future supply - operating in a region where identifying financially viable development is challenging
24
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Board Report Statement of Board members’ responsibilities The Board is responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Housing Association requires the Board to prepare financial statements for each financial year. Under that legislation the Board has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under Housing Association legislation 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 of the Group and the Association and of the surplus or deficit of the Group and Association for that period. In preparing these financial statements, the Board is required to:
select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Association will continue in business
The Board is responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Association’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Association and enable them to ensure that the financial statements comply with Housing Association legislation (Co-operative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for private registered providers of social housing 2015). The Board is also responsible for safeguarding the assets of the Group and Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Association’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclosure of information to auditors Each of the Board members at the date of approval of this report has confirmed that:
As far as the Board members are aware, there is no relevant audit information of which the Group’s auditor is unaware; and
The Board members have taken all the steps that they ought to have taken as Board members in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information.
25
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Board Report Internal Control The Board is responsible for the Association’s system of internal control. This system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against material misstatement or loss. There is an ongoing process for identifying, evaluating and managing any significant risks faced by the association, and this has been in place for the year under review and up to the date of the approval of the annual report and accounts. These are the procedures which the board has established and which are designed to provide effective internal control: Identification and evaluation of key risks The Board has approved a Risk Management Framework, setting out the embedded risk management processes to be used across the business. These include the identification, evaluation and control of significant risks at corporate and departmental level. SYHA’s policy is for risk assessments to be prepared for all material new business activities. Regular reports on corporate risks are presented to the Board, and the Senior Management Team regularly reviews departmental risks. In addition, the Chief Executive provides regular updates to the Board on significant changes affecting key risks. Monitoring and corrective action A system of control self-assessment and hierarchical reporting is in place for all key operational processes. This provides for successive assurances to be given at increasingly higher levels of management, and to the Board. This includes procedures for ensuring that appropriate corrective action is taken in respect of any material control issues. Control environment and control procedures The Association has a Code of Conduct, which sets out the Association’s policy with regards to integrity and ethics, and this is disseminated to all employees. SYHA maintains a framework of policies and procedures with which all employees must comply. These cover issues such as delegated authority, accounting, treasury management, health and safety, data protection and fraud prevention and detection. The Association receives reports from various external regulatory bodies, such as the Homes and Communities Agency. The Board reviews all material reports of this nature. Information and financial reporting systems Financial control procedures include preparation of detailed annual budgets for all areas of the business, approved by the Board. The Board receives reports each quarter comparing actual performance with budget. Information on performance indicators across the business is considered each quarter by the Board to assess progress towards the achievement of key business objectives and targets. Detailed financial information is provided regularly to all budget holders. The Board approves a long-term business plan each year. The Audit Committee considers a report from the Association’s external auditors on the outcome of their audit, including comments on any internal control or risk issues that may have arisen. Internal Audit The Association has a programme of internal audit, based upon a risk-based needs assessment. This provides a degree of assurance as to the effectiveness of internal control systems. Reports are presented to the Audit Committee, which, in turn, reports regularly to the Board. The board has a current strategy and policy on fraud covering prevention, detection and reporting of fraud, and the recovery of assets. The Board has reviewed the effectiveness of the system of internal control. No weaknesses in internal control have resulted in material losses, contingencies, or uncertainties which require disclosure in the financial statements or the auditor’s report on the financial statements.
26
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Board Report AUDITORS A resolution to reappoint Mazars LLP as auditors will be proposed at the forthcoming annual meeting.
BY ORDER OF THE BOARD Approved by the Board on 7th September 2016 and signed on its behalf by
B Walsh Chair of the Board of Management
27
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Independent auditor’s report to the members of South Yorkshire Housing Association Group
We have audited the financial statements of South Yorkshire Housing Association Limited for the year ended 31st March 2016 which comprise the Group and the parent Association’s Statements of Comprehensive Income, the Group and the parent Association’s Statements of Financial Position, the Group Cash Flow Statement, the Group and the parent Association’s Statements of Changes in Reserves 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), including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.
Respective responsibilities of The Board and auditor As explained more fully in the Statement of the Board’s Responsibilities set out on page 10, the Board is responsible for the preparation of the financial statements and for being satisfied that they 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. This report is made solely to the parent Association’s members, as a body, in accordance with Part 7 of the Co-operative and Community Benefit Societies Act 2014 and Chapter 4 of Part 2 of the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to the parent 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 parent Association and the parent Association’s members as a body for our audit work, for this report, or for the opinions we have formed.
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/auditscopeukprivate.
Opinion on the financial statements In our opinion the financial statements:
give a true and fair view of the state of the Group and parent Association’s affairs as at 31st March 2016 and of the Group and parent Association’s surplus for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”; and have been prepared in accordance with the requirements of the Co-operative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2015.
28
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Independent auditor’s report to the members of South Yorkshire Housing Association Group
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;
the parent Association has not kept proper books of account; or a satisfactory system of control over transactions has not been maintained; or the financial statements are not in agreement with the books of account; or we have not received all the information and explanations we require for our audit.
Mazars LLP Chartered Accountants and Statutory Auditor 45 Church Street Birmingham B3 2RT
Date:
29
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Consolidated & Association Statement of Comprehensive Income For the year ended 31 March 2016 Note
2016 £’000
Group 2015 £’000
2016 £’000
Association 2015 £’000
Turnover
3a
47,291
45,200
45,883
43,714
Operating expenditure
3a
(39,556)
(39,884)
(38,649)
(38,830)
Operating surplus
3a
7,735
5,316
7,234
4,884
Gain on disposal of property, plant and equipment
4
783
711
761
711
Finance income
6
101
236
98
233
Interest and financing costs
5
(4,982)
(4,980)
(4,382)
(4,459)
14
34
291
30
291
14
(14)
83 (14)
83
Surplus on revaluation of investment properties (Deficit)/surplus on revaluation of fixed asset investments Surplus before tax Taxation
10
Surplus for the year Actuarial gain/ (loss) in respect of pension schemes Total comprehensive income for the year
20
3,657
1,657
3,727
1,743
-
-
-
-
3,657
1,657
3,727
1,743
127
(270)
127
(270)
3,784
1,387
3,854
1,473
30
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Consolidated & Association Statement of Financial Position At 31 March 2016
Group
Association 2016 2015 £’000 £’000
Note Fixed assets Intangible assets Housing properties Other property, plant and equipment Investment in subsidiary Other investments
11 12 13 14 14
987 303,014 2,408 2,852
1,087 298,646 2,395 4,637
336 289,355 2,400 814 2,698
349 284,758 2,386 894 4,637
309,261
306,765
295,603
293,024
15 16 17
1,058 2,732 9,252
976 2,486 11,999
1,058 2,630 8,586
841 2,413 11,453
19
13,042
15,461
12,274
14,707
(11,526)
(10,336)
(11,358)
(10,061)
1,516
5,125
916
4,646
Current assets Inventories Debtors Cash and cash equivalents
Creditors: Amounts falling due within one year Net current assets Total assets less current liabilities
19
310,777
311,890
296,519
297,670
Creditors: Amounts falling due after more than one year
19
(280,250)
(285,033)
(265,822)
(270,712)
Defined benefit pension liability
20
(761)
(876)
(761)
(876)
29,766
25,982
29,936
26,082
29,609 157
25,982 -
29,779 157
26,082 -
29,766
25,982
29,936
26,082
Net assets
Capital and reserves Called-up share capital Revenue reserve Restricted reserve
22
Total reserves
The financial statements of South Yorkshire Housing Association Group were approved by the Board and signed on its behalf by:
Board Member
Board Member
Company Secretary 31
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Statement of Changes in Reserves At 31 March 2016
Consolidated
At 1 April 2015 Surplus for the year Actuarial (loss) / gain in respect of pension schemes
At 31 March 2016
Association
At 1 April 2015 Surplus for the year Actuarial (loss) / gain in respect of pension schemes
At 31 March 2016
Income and expenditure reserve £’000
Restricted reserve £’000
Total £’000
25,982
-
25,982
3,500
157
3,657
127
-
127
29,609
157
29,766
Income and expenditure reserve £’000
Restricted reserve £’000
Total £’000
26,082
-
26,082
3,570
157
3,727
127
-
127
29,779
157
29,936
32
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Consolidated Statement of Cash Flows For the year ended 31 March 2016
Note Net cash generated from operating activities
2015 £’000
14,051
14,835
Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Grants received Interest received
(9,979) 783 113 99
(13,639) 711 (791) 250
Net cash flows from investing activities
(8,984)
(13,469)
Cash flows from financing activities Interest paid Interest element of finance lease rental payments Repayments of borrowings
(4,382) (600) (2,832)
(4,272) (521) (2,896)
Net cash flows from financing activities
(7,814)
(7,689)
Net decrease in cash and cash equivalents
(2,747)
(6,323)
Cash and cash equivalents at beginning of year
11,999
18,322
9,252
11,999
Cash and cash equivalents at end of year
23
2016 £’000
2016 £’000 Cash flow from operating activities Surplus for the year Adjustment for non-cash items: Depreciation of property, plant and equipment Amortisation of intangible assets Decrease / (increase) in inventories Decrease / (increase) in debtors Increase / (decrease) in creditors and provisions Pension costs less contributions payable Carrying amount of property, plant & equipment disposals Impairment loss on property, plant and equipment (Increase)/decrease in fair value of investment property Adjustments for investing or financing activities: Proceeds from the sale of property, plant and equipment Government grants utilised in the year Interest payable Interest received Gain on investment activities (withdrawal of cash from charged account) Cash generated by operations
2015 £’000
7,735
5,316
5,598 106 (14) (312) 1,164 120 (918) (170)
5,597 93 7 1,749 171 2,410 (2,490) (374)
(783) (1,403) 4,982 (99)
(711) (1,476) 4,793 (250)
(1,955)
-
14,051
14,835
33
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 1.
Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and to the preceding year. General information and basis of accounting The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council and comply with the Statement of Recommended Practice for registered social housing providers 2014 (SORP), the Housing and Regeneration Act 2008 and the Accounting Direction for private registered providers of social housing 2015. South Yorkshire Housing Association Limited is a public benefit entity, as defined in FRS 102 and applies the relevant paragraphs prefixed â&#x20AC;&#x2DC;PBEâ&#x20AC;&#x2122; in FRS 102. Statement of compliance This is the first year the Group has prepared its financial statements in accordance with FRS 102, accordingly the financial information as at 1 April 2014 (being the date of transition) and for the year ended 31 March 2015 have been restated for material adjustments on adoption of FRS 102 in the current year. For more information see note 28. Basis of consolidation The Group financial statements consolidate the financial statements of the Association and its subsidiary undertakings drawn up to 31 March each year. South Yorkshire Housing Association Limited has four subsidiary undertakings. Two of these are dormant and are excluded from consolidation on grounds of materiality, but two, SYHA Enterprises Limited and Alliance Housing Association (South Yorkshire) Limited, are trading. These accounts consolidate those of the Association, Alliance Housing Association (South Yorkshire) Limited and SYHA Enterprises Limited made up to 31 March 2016. Housing properties Housing properties for letting and shared ownership properties are stated at cost less depreciation less accumulated depreciation and accumulated impairment losses. Cost includes the cost of acquiring land and buildings, directly attributable development costs and borrowing costs directly attributable to the construction of new housing properties during the development. Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete. Depreciation is charged so as to write down the net book value of housing properties to their estimated residual value, on a straight line basis, over their useful economic lives of 100 years. Freehold land is not depreciated. Major components Major components of housing properties, which have significantly different patterns of consumption of economic benefits, are treated as separate assets and depreciated over their expected useful economic lives at the following annual rates: Structure
100 years
Roofs
70 years
Electrics
40 years
Doors and windows
30 years
Bathrooms
30 years
Mechanical systems
30 years
Kitchens
20 years
Lifts
20 years
Gas boilers
15 years
34
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 Properties held on long leases are depreciated over their estimated useful economic lives or the lease duration if shorter. Improvements Where there are improvements to housing properties that are expected to provide incremental future benefits, these are capitalised and added to the carrying amount of the property and depreciated in accordance with the depreciation policy. Any works to housing properties which do not replace a component or result in an incremental future benefit are charged as expenditure in surplus or deficit in the Statement of Comprehensive Income. Leaseholders Where the rights and obligations for improving a housing property reside with the leaseholder or tenant, any works to improve such properties incurred by the Association is recharged to the leaseholder and recognised in surplus or deficit in the Statement of Comprehensive Income along with the corresponding income from the leaseholder or tenant. Non-housing property, plant and equipment Non-housing property, plant and equipment is stated at historic cost less accumulated depreciation and any provision for impairment. Depreciation is provided on all non-housing property, plant and equipment, other than investment properties and freehold land, at rates calculated to write off the cost or valuation, less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows: Office premises
- written off over the term of the lease
Enhancement to office premises
- 10 years
Housing management and telephone systems - 8 years Office equipment and computer hardware
- 4 years
Motor vehicles
- 4 years
Furnishing schemes and general equipment
- 4 â&#x20AC;&#x201C; 7 years
Investment properties The classification of properties as investment property or property plant and equipment is based upon the intended use of the property. Properties held to earn commercial rentals or for capital appreciation or both are classified as investment properties. Properties that are used for administrative purposes or that are held for the provision of social housing are treated as property plant and equipment. Mixed use property is separated between investment property and property, plant and equipment. Land is accounted for based on its intended use. Where land is acquired speculatively with the intention of generating a capital gain and/or a commercial rental return it is accounted for as investment property. Where land is acquired for use in the provision of social housing or for a social benefit it is accounted for as property, plant and equipment Investment properties are measured at fair value annually with any change recognised in surplus or deficit in the Statement of Comprehensive Income. Intangible assets Intangible assets are stated at historic cost or valuation, less accumulated amortisation and any provision for impairment. Amortisation is provided on all Intangible assets at rates calculated to write off the cost or valuation of each asset on a straight-line basis over its expected useful life, as follows: Software
- 4 years
Goodwill*
- 10 years
*This relates to the acquisition of Rotherlets, TPLS and Winkworth (lettings agencies) by SYHA Enterprises Limited.
35
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 Impairment of social housing properties Properties held for their social benefit are not held solely for the cash inflows they generate and are held for their service potential. An assessment is made at each reporting date as to whether an indicator of impairment exists. If such an indicator exists, an impairment assessment is carried out and an estimate of the recoverable amount of the asset is made. Where the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised in surplus or deficit in the Statement of Comprehensive Income. The recoverable amount of an asset is the higher of its value in use and fair value less costs to sell. Where assets are held for their service potential, value in use is determined by the present value of the assetâ&#x20AC;&#x2122;s remaining service potential plus the net amount expected to be received from its disposal. Depreciated replacement cost is taken as a suitable measurement model. An impairment loss is reversed if the reasons for the impairment loss have ceased to apply and included in surplus or deficit in the Statement of Comprehensive Income. Social Housing Grant and other Government grants Where grants are received from government agencies such as the Homes and Communities Agency, local authorities, devolved government agencies, health authorities and the European Commission which meet the definition of government grants they are recognised when there is reasonable assurance that the conditions attached to them will be complied with and that the grant will be received. Government grants are recognised using the accrual model and are classified either as a grant relating to revenue or a grant relating to assets. Grants relating to revenue are recognised in income on a systematic basis over the period in which related costs for which the grant is intended to compensate are recognised. Where a grant is receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support with no future related costs, it is recognised as revenue in the period in which it becomes receivable. Grants relating to assets are recognised in income on a systematic basis over the expected useful life of the asset. Grants received for housing properties are recognised in income over the expected useful life of the housing property structure. Where a grant is received specifically for components of a housing property, the grant is recognised in income over the expected useful life of the component. Grants received from non-government sources are recognised as revenue using the performance model. Recycling of grants Where there is a requirement to either repay or recycle a grant received for an asset that has been disposed of, a provision is included in the Statement of Financial Position to recognise this obligation as a liability. When approval is received from the funding body to use the grant for a specific development, the amount previously recognised as a provision for the recycling of the grant is reclassified as a creditor in the Statement of Financial Position. For shared ownership staircasing sales, when full staircasing has not taken place, the recycling of the grant may be deferred if the net sales proceeds are insufficient to meet the grant obligation relating to the disposal and is not be recognised as a provision. On subsequent staircasing sales, the requirement to recycle the grant becomes an obligation if sufficient sales proceeds are generated to meet the obligation and a provision is recognised at this point. On disposal of an asset for which government grant was received, if there is no obligation to repay the grant, any unamortised grant remaining within liabilities in the Statement of Financial Position related to this asset is derecognised as a liability and recognised as revenue in surplus or deficit in the Statement of Comprehensive Income. Restricted reserves Where reserves are subject to an external restriction they are separately recognised within reserves as a restricted reserve. Revenue and expenditure is included in surplus or deficit in the Statement of Comprehensive Income and a transfer is made from the general reserve to the restricted reserve.
36
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 The balance on the reserve is wholly attributed to the Big Lottery Fund Grant for the Ageing Better programme. During the year to 31 March 2015, the Association received ÂŁ25,878 of restricted funding from South Yorkshire Fire Service Safer Stronger Communities fund to pay for the installation of a fire sprinkler system at a new build development for people with learning difficulties. This funding was spent in full by 31 March 2015. Leased assets At inception the Group assesses agreements that transfer the right to use assets. The assessment considers whether the arrangement is, or contains, a lease based on the substance of the arrangement. Finance leased assets Leases of assets that transfer substantially all the risks and rewards incidental to ownership are classified as finance leases. Finance leases are capitalised at commencement of the lease as assets at the fair value of the leased asset or, if lower, the present value of the minimum lease payments calculated using the interest rate implicit in the lease. Assets are depreciated over the shorter of the lease term and the estimated useful life of the asset. Assets are assessed for impairment at each reporting date. The capital element of lease obligations is recorded as a liability on inception of the arrangement. Lease payments are apportioned between capital repayment and finance charge, using the effective interest rate method, to produce a constant rate of charge on the balance of the capital repayments outstanding. Operating leased assets Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments under operating leases are charged to surplus or deficit in the Statement of Comprehensive Income on a straight-line basis over the period of the lease. Interest payable Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs are calculated using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of a financial instrument and is determined on the basis of the carrying amount of the financial liability at initial recognition. Under the effective interest method, the amortised cost of a financial liability is the present value of future cash payments discounted at the effective interest rate and the interest expense in a period equals the carrying amount of the financial liability at the beginning of a period multiplied by the effective interest rate for the period. Pensions Multi-employer defined benefit pension scheme â&#x20AC;&#x201C; Social Housing Pension Scheme The Association participates in an industry wide multi-employer defined benefit pension scheme where the scheme assets and liabilities cannot be separately identified for each employer. This is accounted for as a defined contribution scheme as there is insufficient information available to account for the scheme as defined benefit. For this multi-employer scheme, there is a contractual agreement between the scheme and the Association that determines how the deficit will be funded and a liability is recognised in the Statement of Financial Position and the resulting expense in surplus or deficit in the Statement of Comprehensive Income for the present value of the contributions payable that arise from the agreement to the extent that they relate to the deficit. Local Government Pension Scheme The Association also participates in a local government pension scheme which is a multi-employer schemes where it is possible for individual employers as admitted bodies to identify their share of the assets and liabilities of the pension scheme. For this scheme the amounts charged to operating surplus are the costs arising from employee services rendered during the period and the cost of plan introductions, benefit changes, settlements and curtailments. They are included as part of staff 37
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 costs. The net interest cost on the net defined benefit liability is charged to revenue and included within finance costs. Remeasurement comprising actuarial gains and losses and the return on scheme assets (excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in other comprehensive income. Defined benefit schemes are funded, with the assets of the scheme held separately from those of the Group, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit credit method. The actuarial valuations are obtained at least triennially and are updated at each Statement of Financial Position date. Defined contribution scheme The Association also participates in a defined contribution scheme where the amount charged to surplus or deficit in the Statement of Comprehensive Income in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Statement of Financial Position. Turnover Turnover represents rent and service charges receivable (net of rent and service charge losses from voids) and disposal proceeds of current assets such as properties developed for outright sale or shared ownership first tranche sales at completion together with revenue grants from local authorities and the Homes and Communities Agency. Shared ownership property sales Shared ownership properties, including those under construction, are split between non-current assets and current assets. The split is determined by the percentage of the property to be sold under the first tranche disposal which is shown on initial recognition as a current asset, with the remainder classified as a non-current asset within property plant and equipment. Where this would result in a surplus on the disposal of the current asset that would exceed the anticipated overall surplus, the surplus on disposal of the first tranche is limited to the overall surplus by adjusting the costs allocated to current or noncurrent assets. Proceeds from first tranche disposals are accounted for as turnover in the Statement of Comprehensive Income of the period in which the disposals occur and the cost of sale is transferred from current assets to operating costs. Proceeds from subsequent tranche sales are treated as disposals of fixed assets. Investments Investments that are publicly traded or whose fair value can be measured reliably are measured at fair value with changes in fair value recognised in surplus or deficit in the Statement of Comprehensive Income. Other investments are measured at amortised cost less impairment. Financial instruments Financial assets and financial liabilities are recognised when the Association becomes a party to the contractual provisions of the instrument.
38
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 Financial assets carried at amortised cost Financial assets carried at amortised cost comprise rent arrears, trade and other receivables and cash and cash equivalents. Financial assets are initially recognised at fair value plus directly attributable transaction costs. After initial recognition, they are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. If there is objective evidence that there is an impairment loss, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced accordingly. A financial asset is derecognised when the contractual rights to the cash flows expire, or when the financial asset and all substantial risks and reward are transferred. If an arrangement constitutes a financing transaction, the financial asset is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Financial liabilities carried at amortised cost These financial liabilities include trade and other payables and interest bearing loans and borrowings. Non-current debt instruments which meet the necessary conditions in FRS 102, are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance costs in the Statement of Comprehensive Income. Discounting is omitted where the effect of discounting is immaterial. A financial liability is derecognised only when the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires. Financing transactions – rent arrears For rent arrears where the arrangement constitutes, in effect, a financing transaction because of extended credit arrangements the arrears are derecognised as a financial asset and a new financial asset measured at the present value of the future payments discounted at an appropriate market rate of interest. The present value adjustment is recognised in surplus or deficit in the Statement of Comprehensive Income. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with other short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value. Gift aid payments Gift aid payments are charged as distributions of reserves in accordance with the guidance included in the Institute of Chartered Accountants technical release ‘Guidance on donations by a company to its parent charity’. 2.
Significant management judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
39
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Significant management judgements The following are management judgements in applying the accounting policies of the Association that have the most significant effect on the amounts recognised in the financial statements. Impairment of social housing properties The Association has to make an assessment as to whether an indicator of impairment exists. In making the judgement, management considered the detailed criteria set out in the SORP. From 1 April 2016, South Yorkshire Housing Association Limited reduced social housing rents by one per cent per annum and will continue to do so in each year until 2019/20 in accordance with Welfare Reform and Work Act 2016. Despite cost efficiency savings and other changes to South Yorkshire Housing Association Limitedâ&#x20AC;&#x2122;s business, compliance with the new rent regime has resulted in a loss of net income for certain social housing property. This is a trigger for impairment. In accordance with paragraphs 14.43 to14.45 of the Housing SORP 2014, South Yorkshire Housing Association Limited is required to make the following disclosure: a) Judgements made in defining the cash-generating unit (CGU) b) Estimation technique and judgement used in measuring recoverable amount c) When VIU-SP is used to estimate the recoverable amount, the key assumptions used and details of the method used South Yorkshire Housing Association Limited estimated the recoverable amount of its housing properties as follows: (a) Determined the level at which the recoverable amount is to be assessed (i.e. the individual asset level or at CGU level. The CGU was determined to be an individual scheme (b) Estimated the recoverable amount of the CGU (c) Calculated the carrying amount of the CGU and (d) Compared the carrying amount to the recoverable amount to determine if an impairment loss had occurred. Based on this assessment, South Yorkshire Housing Association Limited calculated the Depreciated Replacement Cost (DRC) of each social housing property scheme, using appropriate construction costs and land prices. Comparing this to the carrying amount of each scheme, there was no impairment of social housing properties. Estimation uncertainty The Association makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Fair value measurement Management uses valuation techniques to determine the fair value of assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management base the assumptions on observable data as far as possible but this is not always available. In that case, management uses the best information available. Estimated fair values may vary from the actual process that would be achievable in an armâ&#x20AC;&#x2122;s length transaction at the reporting date. Provisions
40
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 These provisions require managementâ&#x20AC;&#x2122;s best estimate of the costs that will be incurred based on legislative and contractual requirements. In addition, the timing of the cash flows and the discount rates used to establish net present value of the obligations require managementâ&#x20AC;&#x2122;s judgement. Defined benefit pension scheme The Association has obligations to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depend on a number of factors, including; life expectancy, salary increases, asset valuations and the discount rate on corporate bonds. Management estimates these factors in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends.
41
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 3a. Particulars of turnover, cost of sales, operating costs and operating surplus – Group
Social housing lettings (note 3b) Other social housing activities 1st tranche property sales Charges for support services Other
Turnover £’000
2016 Operating costs £’000
Operating surplus £’000
34,122
(27,677)
6,445
3,108 3,141 3,524
(2,799) (3,606) (2,185)
309 (465) 1,339
──────── ──────── ──────── 43,895 (36,267) 7,628 Activities other than social housing activities Total
Social housing lettings Other social housing activities 1st tranche property sales Charges for support services Other*
3,396 (3,289) 107 ──────── ──────── ──────── 47,291 (39,556) 7.735 ════════ ════════ ════════
Turnover £’000
2015 Operating costs £’000
Operating surplus £’000
34,979
(27,943)
7,036
392 3,483 2,516
(284) (3,777) (3,973)
108 (294) (1,456)
──────── ──────── ──────── 41,370 (35,977) 5,394 Activities other than social housing activities
3,830
(3,907)
(77)
Total
──────── ──────── ──────── 45,200 (39,884) 5,316 ════════ ════════ ════════ * Included in other income is a £1,000 Celebrating Excellence in Participation Community Grant from NHS England.
42
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 3b. Particulars of Income and Expenditure from social housing lettings – Group General Needs Temporary Direct Managed Housing Housing Supported Housing & Housing for Older People £’000 £’000 £’000 Income
Residential Care Homes
Agency Managed Supported Housing
2016 Total
2015 Total
£’000
£’000
£’000
£’000
Rents receivable Service charge income Amortised government grant Other grants
17,268 512 957 -
587 350 18 -
4,089 3,160 340 16
3,155 5 2,624
799 18 74 150
25,898 4,040 1,394 2,790
25,451 3,799 1,500 4,229
Turnover from social housing lettings
18,737
955
7,605
5,784
1,041
34,122
34,979
461 3,190 3,535 948 153 4,111 94
238 24 46 23 203 18 146 31 6
2,158 1,597 739 128 1,408 1 358 57 423 820 646
73 168 165 6 1,019 3,053 605 71 81
47 196 276 34 85 233 3
2,977 5,175 4,761 1,139 2,630 3,054 963 228 654 5,266 830
3,217 4,866 4,684 1,192 7,106 158 702 4,995 1,023
12,492
735
8,335
5,241
874
27,677
27,943
6,245
220
(730)
543
167
6,445
7,036
163
353
527
70
-
1,113
1,305
Expenditure Service charge costs Management Routine maintenance Planned maintenance Care provision Payments to care providers Household expenditure Bad debts Property lease charges Depreciation of housing properties Other costs Operating costs housing lettings Operatingsopcsocial surplus social housing lettings Void losses
FROM LETTINGS 43
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 3c. Particulars of turnover, cost of sales, operating costs and operating surplus – Association
Social housing lettings (note 3d) Other social housing activities 1st tranche property sales Charges for support services Other
Turnover £’000
2016 Operating costs £’000
Operating surplus £’000
32,959
(27,412)
5,547
3,108 3,141 3,279
(2,799) (3,606) (1,543)
309 (465) 1,736
──────── ──────── ──────── 42,487 (35,360) 7,127 Activities other than social housing activities Total
Social housing lettings Other social housing activities 1st tranche property sales Charges for support services Other *
3,396 (3,289) 107 ──────── ──────── ──────── 45,883 (38,649) 7,234 ════════ ════════ ════════
Turnover £’000
2015 Operating costs £’000
Operating surplus £’000
33,843
(27,658)
6,185
392 3,483 2,166
(298) (3,777) (3,190)
94 (294) (1,024)
──────── ──────── ──────── 39,884 (34,923) 4,961 Activities other than social housing activities
3,830
(3,907)
(77)
Total
──────── ──────── ──────── 43,714 (38,830) 4,884 ════════ ════════ ════════ * Included in other income is a £1,000 Celebrating Excellence in Participation Community Grant from NHS England.
44
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 3d. Particulars of Income and Expenditure from social housing lettings – Association General Needs Temporary Direct Managed Housing Housing Supported Housing & Housing for Older People £’000 £’000 £’000 Income
Residential Care Homes
Agency Managed Supported Housing
2016 Total
2015 Total
£’000
£’000
£’000
£’000
Rents receivable Service charge income Amortised government grant Other grants
16,160 493 921 -
587 350 18 -
4,089 3,160 340 16
3,155 5 2,624
799 18 74 150
24,790 4,021 1,358 2,790
24,369 3,781 1,464 4,229
Turnover from social housing lettings
17,574
955
7,605
5,784
1,041
32,959
33,843
461 3,190 3,535 948 153 3,846 94
238 24 46 23 203 146 18 31 6
2,158 1,597 739 128 1,408 1 358 423 57 820 646
73 168 165 6 1,019 3,053 605 71 81
47 196 276 34 85 233 3
2,977 5,175 4,761 1,139 2,630 3,054 963 654 228 5,001 830
3,217 4,866 4,684 1,172 7,106 702 158 4,760 993
12,227
735
8,335
5,241
874
27,412
27,658
5,347
220
(730)
543
167
5,547
6,185
157
353
527
70
-
1,107
1,300
Expenditure Service charge costs Management Routine maintenance Planned maintenance Care provision Payments to care providers Household expenditure Property lease charges Bad debts Depreciation of housing properties Other costs Operating costs housing lettings Operatingsopcsocial surplus social housing lettings Void losses
FROM LETTINGS 45
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 4.
Surplus on disposal of housing properties Group
Sale of subsequent tranche shared ownership properties Costs of sale
Association
2016 £’000 2,620 (1,837)
2015 £’000 1,816 (1,105)
2016 £’000 2,451 (1,690)
2015 £’000 1,816 (1,105)
783
711
761
711
Surplus on disposal
5
Interest and financing costs
Bank loans and overdrafts Finance lease charges Transaction fee amortisation Net interest on defined benefit liability (see note 20)
Borrowing costs capitalised
Group 2016 £’000 4,404 600 6 132
2015 £’000 4,436 521 6 197
Association 2016 2015 £’000 £’000 4,404 4,436 6 6 197 132
5,142
5,160
4,542
4,639
(160)
(180)
(160)
(180)
4,982
4,980
4,382
4,459
Borrowing costs have been capitalised based on a capitalisation rate of 3.58 per cent (2015: 3.56 per cent), which is the weighted average of rates applicable to the Group’s general borrowings outstanding during the year.
6.
Finance income Group 2016 £’000
Bank interest receivable On investment with asset manager
2015 £’000
Association 2016 2015 £’000 £’000
78 23
202 34
75 23
199 34
101
236
98
233
46
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 7.
Surplus on ordinary activities before taxation
Surplus on ordinary activities before taxation is stated after charging/(crediting): Group
Depreciation of property, plant and equipment Amortisation of capital grants (Gain) / loss on disposal of fixed assets Audit fees: - Statutory audit - Audit-related assurance services - Taxation compliance services Operating lease rentals
8.
-
Association
2016 £’000 5,221 (1,406) 761
2015 £’000 5,421 (1,512) 711
2016 £’000 5,218 (1,370) 761
2015 £’000 5,168 (1,476) 711
29 6 1 132
25 6 1 121
28 6 1 132
25 6 1 121
Staff costs Group 2016 £’000
Wages and salaries Social security costs Other pension costs (see note 20)
2015 £’000
Association 2016 2015 £’000 £’000
10,846 860 208
10,551 836 208
10,459 830 208
10,112 808 208
11,914
11,595
11,497
11,128
The Full Time Equivalent number of staff who received emoluments, excluding pension contribution, in excess of £60,000 were as shown below. Group 2016 2015 number number Salary Band £ 60,000 – 69,999 70,000 – 79,999 80,000 – 89,999 90,000 – 99,999 100,000 – 109,999 110,000 – 119,999 120,000 – 129,999 130,000 – 139,999
1 4 -
1 4 1
Association 2016 2015 number number 1 4 1
1 4 1
47
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 The average full time equivalent number of employees was: Group 2016 2015 number number 444
424
Association 2016 2015 number number 422
398
2016 £’000
2015 £’000
498 63 13
498 63 18
22 -
23 -
22
23
2016 £
2015 £
1,000 1,750 1,750 5,500 1,750 750 1,000 1,000 1,000 1,000 1,000 750
1,100 1,678 2,333 5,600 2,292 1,100 1,160 1,100 1,160 1,100 1,160 500
Alliance Housing Association (South Yorkshire) Limited: M Mahroof S Munir Y Ahmed
500 500 625
500 500 500
SYHA Enterprises Limited: S Quinn D Lockwood
500 500
500 500
The basis of the calculation of the full time equivalents was based on 37 hours per week. 9.
Directors’ remuneration and transactions
Group and Association Key management personnel remuneration Directors who are executive staff members Wages and salaries Social security costs Other pension costs Board members Wages and salaries Social security costs Other pension costs
South Yorkshire Housing Association Limited: B Gayle L Greenwood M Riley B Walsh I Norris A Khayum K Chambers D Sadler Z Ahmed R Royle P Taylor A Buck (Appointed October 2014)
48
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 Directors are defined as the members of the Board, the Chief Executive and any other person who is a member of the Executive Management team. 2016 £’000
2015 £’000
133
133
Remuneration of the highest paid director, excluding pension contributions: Emoluments The Chief Executive is an ordinary member of the pension scheme. No enhanced or special terms apply. 10.
Tax on surplus on ordinary activities
Surplus on ordinary activities before tax Tax on surplus on ordinary activities at standard UK corporation tax rate of 20% (2015: 21%) Effects of: - Depreciation in excess of capital allowances - Effect of tax rate change - Unrelieved tax losses - Surplus arising with charitable status
Group 2016 £’000 148
2015 £’000 2,449
Association 2016 2015 £’000 £’000 130 2,560
30
514
26
538
(3) (1)
(49) 31 (496)
(17) (9) -
(49) 23 (512)
-
-
-
-
Group total tax charge for year
49
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 11.
Intangible fixed assets
Group Goodwill
Software
Total
£’000
£’000
£’000
Cost At 1 April 2015 Additions Disposals
866 -
999 128 -
1,865 128 -
As at 31 March 2016
866
1,127
1,993
Amortisation At 1 April 2015 Charge for the year Eliminated on disposals
128 87 -
650 141 -
778 228 -
215 ══════
791 ══════
1,006 ══════
651 ══════ 738 ══════
336 ══════ 349 ══════
987 ══════ 1,087 ══════
Software
Total
£’000
£’000
999 128 -
999 128 -
1,127
1,127
650 140 -
650 140 -
791 ══════
791 ══════
336 ══════ 349 ══════
336 ══════ 349 ══════
As at 31 March 2016 Net book value As at 31 March 2016 As at 31 March 2015
Association
Cost At 1 April 2015 Additions Disposals As at 31 March 2016 Amortisation At 1 April 2015 Charge for the year Eliminated on disposals As at 31 March 2016 Net book value As at 31 March 2016 As at 31 March 2015
50
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016
12 Tangible fixed assets – housing properties Group Housing properties for letting Shared ownership Partnership Schemes in Schemes in Completed the course Completed the course Completed schemes of construction schemes of construction schemes £’000 £’000 £’000 £’000 £’000 COST At 1 April 2015 Additions Schemes completed Disposals Components replace Movement between categories At end of year DEPRECIATION At 1 April 2015 Charge for the year Disposals Components replaced At end of year NET BOOK VALUE At 31 March 2016 At 31 March 2015
Temporary social housing Completed schemes £’000
Total £’000
927 (48)
339,077 14,049 (4,703) (1,289) -
─────── ─────── 4,783 879 ═══════ ═══════
─────── 347,128 ═══════
308,597 3,973 13,133 (2,484) (1,290) 2,133
9,856 8,684 (13,133) (1,374) -
12,781 62 1,326 (846) 48
1,326 (1,326) -
6,916 (2,133)
─────── 324,062 ═══════
─────── 4,033 ═══════
─────── 13,371 ═══════
─────── ═══════
38,954 4,649 (597) (691) ────── 42,315 ══════
────── ══════
1,070 287 (6) ────── 1,351 ══════
────── ══════
────── ══════
400 48 ────── 448 ══════
40,424 4,984 (603) (691) ────── 44,114 ══════
281,747 ══════ 269,643 ══════
4,033 ══════ 9,856 ══════
12,020 ══════ 11,711 ══════
══════ ══════
4,783 ══════ 6,916 ══════
431 ══════ 527 ══════
303,014 ══════ 298,653 ══════
51
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016
12 Tangible fixed assets – housing properties Association Housing properties for letting Shared ownership Partnership Schemes in Schemes in Completed the course Completed the course Completed schemes of construction schemes of construction schemes £’000 £’000 £’000 £’000 £’000 COST At 1 April 2015 Additions Schemes completed Disposals Components replaced Movement between categories At end of year DEPRECIATION At 1 April 2015 Charge for the year Disposals Components replaced At end of year NET BOOK VALUE At 31 March 2016 At 31 March 2015
Temporary social housing Completed schemes £’000
Total £’000
294,460 3,955 13,133 (2,484) (1,290) 2,133 ─────── 309,907 ═══════
9,856 8,685 (13,133) (1,375) ─────── 4,033 ═══════
12,781 62 1,326 (846) 48 ─────── 13,371 ═══════
1,326 (1,326) ─────── ═══════
6,916 927 (2,133) (48) ─────── ─────── 4,783 879 ═══════ ═══════
324,940 14,028 (4,705) (1,290) ─────── 332,973 ═══════
38,705 4,401 (597) (691) ─────── 41,818 ═══════
─────── ═══════
1,071 287 (6) ─────── 1,352 ═══════
─────── ═══════
400 48 ─────── ───────448 ═══════ ═══════
40,176 4,736 (603) (691) ─────── 43,618 ═══════
268,089 ══════ 255,755 ══════
4,033 ══════ 9,856 ══════
12,019 ══════ 11,711 ══════
══════ ══════
4,783 ══════ 6,916 ══════
(431) ══════ 527 ══════
289,355 ══════ 284,765 ══════ 52
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 12. Tangible fixed assets – housing properties (continued) Included in housing properties for letting are assets at a cost of £14,250k held under a 45 year finance lease sale and leaseback deal by Alliance Housing Association (South Yorkshire) Ltd. An analysis of freehold and long leasehold land and buildings included above has not been provided as the Board consider the expenses of obtaining such an analysis to be unreasonable. Group Disposal of properties Proceeds from disposal of properties Cost of property disposals Surplus on disposal of properties
2016 £’000
2015 £’000
5,558 (4,489) ───── 1,069 ═════
1,816 (1,105) ───── 711 ═════
2016 £’000
2015 £’000
5,558 (4,489) ───── 1,069 ═════
1,816 (1,105) ───── 711 ═════
Association Disposal of properties Proceeds from disposal of properties Cost of property disposals Surplus on disposal of properties
Capital additions – housing properties for letting Following the introduction of component accounting, all expenditure on works to existing properties is capitalised. The split between the amounts spent on additions to schemes completed in previous year, major repairs to existing stock and amounts spent on the retrofitting of photovoltaic panels on some of our stock is as follows: 2016 2015 £’000 £’000 Works to existing properties: Capital funded major repairs 3,701 3,018 Retrofit Programme 91 Additional cost to schemes post completion 231 337 Total
───── 4,023 ═════
───── 3,355 ═════
53
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 13.
Property, plant and equipment - other
Group
Office premises £’000
Office equipment and computer hardware £’000
Others £’000
Total £’000
Cost or valuation At 1 January 2015 Additions Disposals Write-offs
2,060 28 (150)
2,100 94 (67)
3,111 391 (158) (534)
7,271 513 (158) (751)
At 31 March 2016
1,938
2,127
2,810
6,875
Depreciation At 1 January 2015 Charge for the year Disposals Write-offs
596 74 (146)
1,749 159 (67)
2,529 251 (150) (528)
4,874 484 (150) (741)
At 31 March 2016
524
1,841
2,102
4,467
Net book value At 31 March 2016
1,414
286
706
2,406
At 31 March 2015
1,464
351
581
2,395
Net book value At 31 March 2016
1,413
-
-
1,413
At 31 March 2015
1,463
-
-
1,463
Leased assets included above:
54
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 13.
Property, plant and equipment - other (continued)
Association
Office premises £’000
Office equipment and computer hardware £’000
Others £’000
Total £’000
Cost or valuation At 1 January 2015 Additions Disposals Transfers
2,060 28 (149) -
2,100 95 (67) -
3,086 389 (534) (155)
7,246 512 (750) (155)
At 31 March 2016
1,939
2,128
2,786
6,853
Depreciation At 1 January 2015 Charge for the year Disposals Write-offs
596 74 (146) -
1,749 159 (67) -
2,515 249 (528) (148)
4,860 482 (741) (148)
At 31 March 2016
524
1,841
2,088
4,453
Net book value At 31 March 2016
1,415
287
698
2,400
At 31 March 2015
1,464
351
571
2,386
Net book value At 31 March 2016
1,413
-
-
1,413
At 31 March 2015
1,463
-
-
1,463
Leased assets included above:
The gross book value includes £12,581 (2015: £12,581) of non-depreciable assets. The office premises are occupied under a lease expiring in 2096.
55
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 14.
Fixed asset investments 2016
Group
At 1 April 2015 Additions Disposals Revaluation in year At 31 March 2016
2015
Debt Service Reserve £’000
Buy-to-Let Properties £’000
Charged Account £’000
Total £’000
Debt Service Reserve £’000
Buy-to-Let Properties £’000
Charged Account £’000
Total £’000
732 (50)
2,000 154 -
1,905 (1,905)
4,637 154 (1,955)
650 -
1,708 -
1,692 213 -
4,050 213 -
(14)
30
-
16
82
292
-
374
668
2,184
-
2,852
732
2,000
1,905
4,637
The Association differs to the Group by the £154k addition of an investment property. As part of a loan agreement with Haven (32) plc, an amount of the loan principal is held by Trustees to guarantee short term service of the debt should any borrower not make payments in accordance with the loan agreement. The reserve comprises investments acceptable to the Trustees, and held by them on behalf of the Association as borrower. Principal Group investments The parent Association and the Group have investments in the following subsidiary undertakings, associates and other investments which principally affected the surpluses or net assets of the Group. Principal activity Subsidiary undertakings SYHA Enterprises Limited Alliance Housing Association (South Yorkshire) Limited Charter Housing Limited South Yorkshire (Second) Housing Association Limited
15.
Marketing of shared equity sales properties on behalf of SYHA along with private property sales and lettings Registered Provider of housing and associated amenities particularly for people in necessitous circumstances Registered charity - dormant Registered Provider - dormant
Holding*
%
Shares
100
Shares Shares
100 100
Shares
100
Inventories Group 2016 £’000
Completed properties for sale First tranche shared ownership Property held for outright sale Raw materials and consumables
2015 £’000
Association 2016 2015 £’000 £’000
989 69
786 135 55
989 69
786 55
1,058
976
1,058
841
56
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 16.
Debtors
Amounts falling due within one year: Rent arrears Provision for bad debts Amounts owed by Group undertakings Other debtors Prepayments and accrued income
17.
2015 £’000
Association 2016 2015 £’000 £’000
1,918 (917) 4 631 1,096
1,821 (857) 670 852
1,866 (890) 4 605 1,045
1,771 (833) 647 828
2,732
2,486
2,630
2,413
Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
Cash and cash equivalents
Cash at bank and in hand
18.
Group 2016 £’000
9,252
11,999
8,586
11,453
Creditors – amounts falling due within one year
Bank loans and overdrafts (see note 19) Obligations under finance leases and hire purchase contracts (see note 19) Rents received in advance Trade creditors Amounts owed to Group undertakings Corporation tax Other taxation and social security Other creditors Accruals and deferred income
Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
2,910
2,887
2,910
2,887
459 932 382 235 3,827 2,781
456 874 1,945 227 2,572 1,375
921 553 227 3,986 2,761
866 2,087 219 2,642 1,360
11,526
10,336
11,358
10,061
57
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 19.
Creditors – amounts falling due after more than one year Group 2016 £’000
Other creditors Loans (net of capitalised transaction fees) Obligations under finance leases and hire purchase contracts Government grants Net defined benefit pension scheme liability (see note 20)
2015 £’000
Association 2016 2015 £’000 £’000
116,221
119,070
116,220
119,072
10,943 145,850 7,236
10,802 147,366 7,794
142,366 7,236
143,846 7,794
280,250
285,032
265,822
270,712
The loans are secured on freehold housing properties. Interest is payable at a weighted average rate of 3.59% (2015: 3.63%) The total accumulated amount of capital grant received or receivable at the balance sheet date is £156,920,264 Group 2016 £’000 Deferred income - Government grants At 1 April 2015 Grants receivable Disposals Amortisation to Statement of Comprehensive Income
2015 £’000
Association 2016 2015 £’000 £’000
147,366 1,789 (1,899) (1,406)
148,052 1,399 (2,225) (1,512)
143,846 1,789 (1,899) (1,370)
144,496 1,399 (2,225) (1,476)
145,850
147,366
142,366
143,846
1,406
1,512
1,370
1,476
144,444
145,854
140,996
142,370
At 31 March 2016 Amortised within one year Amortised after one year
58
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
Recycled Capital Grant Fund At 1 April 2015 Inputs to RCGF Recycling of grant Interest accrued
1,987 1,203 12
2,260 684 (970) 13
1,987 1,203 12
2,260 684 (970) 13
At 31 March 2016
3,202
1,987
3,202
1,987
Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
Disposal Proceeds Fund At 1 April 2015 Inputs to RCGF Recycling of grant Interest accrued At 31 March 2016
64 63 1
64 -
64 63 1
64 -
128
64
128
64
59
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 Borrowings are repayable as follows:
Bank loans Between one and two years Between two and five years After five years On demand or within one year
Finance leases Between one and two years Between two and five years After five years On demand or within one year
Total borrowings including finance leases Between one and two years Between two and five years After five years On demand or within one year
Less capitalised transaction costs
Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
20,013 15,238 81,048
6,962 26,192 86,002
20,013 15,238 81,048
6,962 26,192 86,002
2,910
2,887
2,910
2,887
119,209
122,043
119,209
122,043
462 1,403 9,078
468 1,439 8,894
-
-
459
457
-
-
11,402
11,258
-
-
20,475 16,641 90,126
7,430 27,631 94,896
20,013 15,238 81,048
6,962 26,192 86,002
3,369
3,344
2,910
2,887
130,611
133,301
119,209
122,043
(78)
(85)
(78)
(85)
130,533
133,216
119,131
121,958
60
SOUTH YORKSHIRE HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2016 20.
Retirement benefit schemes
Social Housing Pension Scheme (SHPS) South Yorkshire Housing Association participates in the scheme, a multi-employer scheme which provides benefits to some 500 non-associated employers. The scheme is a defined benefit scheme in the UK. It is not possible for the company to obtain sufficient information to enable it to account for the scheme as a defined benefit scheme. Therefore it accounts for the scheme as a defined contribution scheme. The scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator and Technical Actuarial Standards issued by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension schemes in the UK. The scheme is classified as a 'last-man standing arrangement'. Therefore the company is potentially liable for other participating employers' obligations if those employers are unable to meet their share of the scheme deficit following withdrawal from the scheme. Participating employers are legally required to meet their share of the scheme deficit on an annuity purchase basis on withdrawal from the scheme. A full actuarial valuation for the scheme was carried out with an effective date of 30 September 2014. This actuarial valuation was certified on 23 November 2015 and showed assets of £3,123m, liabilities of £4,446m and a deficit of £1,323m. To eliminate this funding shortfall, the trustees and the participating employers have agreed that additional contributions will be paid, in combination from all employers, to the scheme as follows: Deficit contributions: Tier 1 From 1 April 2016 to 30 September 2020: Tier 2 From 1 April 2016 to 30 September 2023: Tier 3 From 1 April 2016 to 30 September 2026: Tier 4 From 1 April 2016 to 30 September 2026:
£40.6m per annum (payable monthly and increasing by 4.7% each year on 1st April) £28.6m per annum (payable monthly and increasing by 4.7% each year on 1st April) £32.7m per annum (payable monthly and increasing by 3.0% each year on 1st April) £31.7m per annum (payable monthly and increasing by 3.0% each year on 1st April)
Note that the scheme’s previous valuation was carried out with an effective date of 30 September 2011; this valuation was certified on 17 December 2012 and showed assets of £2,062m, liabilities of £3,097m and a deficit of £1,035m. To eliminate this funding shortfall, payments consisted of the Tier 1, 2 & 3 deficit contributions. Where the scheme is in deficit and where the company has agreed to a deficit funding arrangement, the company recognises a liability for this obligation. The amount recognised is the net present value of the deficit reduction contributions payable under the agreement that relates to the deficit. The present value is calculated using the discount rate detailed in these disclosures. The unwinding of the discount rate is recognised as a finance cost.
61
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements PRESENT VALUES OF PROVISION 31 March 2016
31 March 2015
31 March 2014
(£’000s)
(£’000s)
(£’000s)
Present value of provision
7,210
5,795
6,001
RECONCILIATION OF OPENING AND CLOSING PROVISIONS Period Ending 31 March 2016 (£’000s) Provision at start of period Unwinding of the discount factor (interest expense) Deficit contribution paid Remeasurements - impact of any change in assumptions Remeasurements - amendments to the contribution schedule Provision at end of period
Period Ending 31 March 2015 (£’000s)
7,764 105 (674) 15 7,210
6,001 171 (647) 269 1,970 7,764
Period Ending 31 March 2016 (£’000s) 105 15 208 328
Period Ending 31 March 2015 (£’000s) 171 269 1,970 208 2,618
INCOME AND EXPENDITURE IMPACT
Interest expense Remeasurements – impact of any change in assumptions Remeasurements – amendments to the contribution schedule Contributions paid in respect of future service* Costs recognised in income and expenditure account
*includes defined contribution schemes and future service contributions (i.e. excluding any deficit reduction payments) to defined benefit schemes which are treated as defined contribution schemes. ASSUMPTIONS 31 March 2016 % per annum Rate of discount
2.06
31 March 2015 % per annum
31 March 2014 % per annum
1.92
3.02
The discount rates shown above are the equivalent single discount rates which, when used to discount the future recovery plan contributions due, would give the same results as using a full AA corporate bond yield curve to discount the same recovery plan contributions. The total amount of employer debt on withdrawal for South Yorkshire Housing Association Limited has been calculated as £39,905,200 at 30 September 2015. Social Housing Pension Scheme Growth Fund The company also participates in the SHPS Growth fund, a multi-employer scheme which provides benefits to some 1,300 non-associated participating employers. The scheme is a defined benefit scheme in the UK. It is not possible for the company to obtain sufficient information to enable it to account for the scheme as a defined benefit scheme. Therefore it accounts for the scheme as a defined contribution scheme. The scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator and Technical Actuarial Standards issued by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension schemes in the UK.
62
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements The scheme is classified as a 'last-man standing arrangement'. Therefore the company is potentially liable for other participating employers' obligations if those employers are unable to meet their share of the scheme deficit following withdrawal from the scheme. Participating employers are legally required to meet their share of the scheme deficit on an annuity purchase basis on withdrawal from the scheme. A full actuarial valuation for the scheme was carried out at 30 September 2011. This valuation showed assets of £780m, liabilities of £928m and a deficit of £148m. To eliminate this funding shortfall, the Trustee has asked the participating employers to pay additional contributions to the scheme as follows: Deficit contributions From 1 April 2013 to 31 March 2023:
£13.9m per annum (payable monthly and increasing by 3% each on 1st April)
A full actuarial valuation for the scheme was carried out at 30 September 2014. This valuation showed assets of £793m, liabilities of £970m and a deficit of £177m. To eliminate this funding shortfall, the Trustee has asked the participating employers to pay additional contributions to the scheme as follows: Deficit contributions From 1 April 2016 to 30 September 2025:
£12,945,440 per annum (payable monthly and increasing by 3% each on 1st April)
From 1 April 2016 to 30 September 2028:
£54,560 per annum (payable monthly and increasing by 3% each on 1st April)
The recovery plan contributions are allocated to each participating employer in line with their estimated share of the Series 1 and Series 2 scheme liabilities. Where the scheme is in deficit and where the company has agreed to a deficit funding arrangement the company recognises a liability for this obligation. The amount recognised is the net present value of the deficit reduction contributions payable under the agreement that relates to the deficit. The present value is calculated using the discount rate detailed in these disclosures. The unwinding of the discount rate is recognised as a finance cost. PRESENT VALUES OF PROVISION
Present value of provision
31 March 2016
31 March 2015
31 March 2014
(£s)
(£s)
(£s)
25,959
29,668
31,094
63
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements RECONCILIATION OF OPENING AND CLOSING PROVISIONS Period Ending 31 March 2016 (£s)
Period Ending 31 March 2015 (£s)
29,668
31,094
485
824
(3,579)
(3,475)
Remeasurements - impact of any change in assumptions
(406)
1,225
Remeasurements - amendments to the contribution schedule
(209)
-
25,959
29,668
Period Ending 31 March 2016 (£s)
Period Ending 31 March 2015 (£s)
485
824
Remeasurements – impact of any change in assumptions
(406)
1,225
Remeasurements – amendments to the contribution schedule
(209)
-
-
-
(130)
2,049
Provision at start of period Unwinding of the discount factor (interest expense) Deficit contribution paid
Provision at end of period
INCOME AND EXPENDITURE IMPACT
Interest expense
Contributions paid in respect of future service* Costs recognised in income and expenditure account
*includes defined contribution schemes and future service contributions (i.e. excluding any deficit reduction payments) to defined benefit schemes which are treated as defined contribution schemes. ASSUMPTIONS
Rate of discount
31 March 2016 % per annum
31 March 2015 % per annum
31 March 2014 % per annum
2.07
1.74
2.82
The discount rates shown above are the equivalent single discount rates which, when used to discount the future recovery plan contributions due, would give the same results as using a full AA corporate bond yield curve to discount the same recovery plan contributions.
South Yorkshire Pension Fund (SYPF) South Yorkshire Housing Association also participates in the South Yorkshire Pension Fund (SYPF). SYPF Retirement Benefit Scheme is an independently administered pension providing benefits based on final pensionable pay. The contributions are determined by a qualified actuary on the basis of triennial valuations using discounted cash flow techniques. The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of increase in salaries and pensions.
64
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements The results and assumptions of the most recent valuation of the scheme are as follows: Valuation date Valuation method Value of liabilities Funding level for accrued benefits Salary scale increase per annum Pension increase per annum
31 March 2013 Projected unit £6,997 million 76% 4.35% 2.6%
At the end of the year there is a pension provision of £761,000 (2015: £876,000) in accordance with FRS17. The current pension charge for this scheme for the year was £39,000 (2015: £30,000). The valuation at 31 March 2016 has been updated by the actuary on an FRS102 basis at the same date. The major assumptions used in this valuation were: 2016
2015
%
%
Rate of increase in salaries
3.75
3.75
Rate of increase in pensions in payment
2.00
2.00
Discount rate
3.60
3.30
Inflation assumption
2.00
2.00
The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. Scheme assets The fair value of the Group’s share of the scheme’s assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were:
% of scheme assets Bond - Government Bonds - Corporate Equities Property Cash/liquidity Other
Present value of scheme liabilities Deficit in the scheme - pension liability
15.0 6.4 58.6 11.9 1.8 8.0
Value at 2016 £’000 311 133 1,218 247 38 167
% of scheme assets 15.3 5.8 59.6 10.9 1.6 6.8
Value at 2015 £’000 318 121 1,238 227 33 141
─────── 2,114
────── 2,078
(2,875) ─────── (761)
(2,954) ─────── (876)
═════
═════
65
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements
2016 £’000
2015 £’000
(876) (39) (1) 55 (27) 127 ───── (761) ═════
(601) (30) (1) 52 (26) (270) ───── (876) ═════
2016 £’000
2015 £’000
39 ═════
30 ═════
Movement in deficit during the year Deficit in scheme at beginning of year Current service cost Administration cost Contributions paid Other finance income/costs Actuarial surplus/(deficit) Deficit in the scheme at end of year Group and Association Analysis of other pension costs charged in arriving at operating surplus/(deficit)
Current service cost Analysis of amounts included in other finance income/(costs) Past Service Cost gain Expected return on pension scheme assets Interest on pension scheme liabilities
69 (96) ───── (27) ═════
(82) 108 ───── (26) ═════
2016 £’000
2015 £’000
127 ─────
171 (441) ─────
127 ═════
(270) ═════
Analysis of amount recognised in Statement of Total Recognised Surpluses and Deficits
Actual return less expected return on scheme assets Experience surpluses/(deficits) arising on scheme liabilities Changes in assumptions underlying the present value of scheme liabilities Actuarial surplus/(deficit) recognised in Statement of Total Recognised Surpluses and Deficits
66
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements 21.
Financial instruments
The carrying values of the Group and Association’s financial assets and liabilities are summarised by category below: Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
Financial assets Measured at fair value through Statement of Comprehensive Income Current asset listed investments
-
-
-
-
Measured at discounted amount receivable Rent arrears financing transactions (see note 16)
-
-
-
-
2,730 4
2,486 -
2,626 4
2,413 -
2,734
2,486
2,630
2,413
119,209
122,043
119,209
122,043
11,402
11,258
-
-
161,243
162,152
158,050
158,814
-
-
-
-
291,854
295,453
277,259
280,857
2016 £
2015 £
At beginning of year Issued during the year Cancelled during the year
47 (2)
54 (7)
At end of year
45
47
Measured at undiscounted amount receivable Rent arrears and other debtors (see note 16) Amounts due from related undertakings (see note 16)
Financial liabilities Measured at amortised cost: Loans payable (see note 18 & 19) Obligations under finance leases (see note 18 & 19) Measured at undiscounted amount payable Trade and other creditors (see note 18) Amounts owed to related undertakings (see note 18)
22.
Share capital
The shares provide members with the right to vote at general meetings but do not have a right to any dividend or distribution in a winding-up, and are not redeemable.
67
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements 23.
Financial commitments
Capital commitments are as follows:
Contracted for but not provided for Approved by the directors but not contracted for
Group 2016 £’000
2015 £’000
Association 2016 2015 £’000 £’000
2,581 6,363
5,812 8,566
2,581 6,363
5,812 8,566
8,944
14,378
8,944
14,378
£2.122 million (2015: £4.139M) will be financed through SHG and other capital grants with the balance being funded through approved loan finance. Total future minimum lease payments under non-cancellable operating leases are as follows: Group 2016 £’000 Payments due: - within one year - between one and five years - after five years
24.
2015 £’000
Association 2016 2015 £’000 £’000
136 92
132 42
136 92
132 42
-
-
-
-
228
227
228
227
Housing stock Group
Owned and managed General needs housing accommodation Housing accommodation at affordable rent Housing accommodation at intermediate rent Supported housing accommodation Shared ownership accommodation Keyworker properties Housing accommodation let at market rent Non-social housing accommodation Total
2016 Units
2015 Units
3,507 203 64 1,638 306
3,559 157 70 1,717 250
5,718
5,753
Association 2016 2015 Units Units 3,290 203 64 1,638 306
3,342 157 70 1,717 250
5,501
5,536
68
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements 25.
Related party transactions
The Association has four wholly owned subsidiary undertakings: Alliance HA (South Yorkshire) Ltd SYHA Enterprises Ltd South Yorkshire (Second) HA Ltd Charter Housing Ltd Alliance HA (South Yorkshire) Ltd and SYHA Enterprises Ltd are trading. The other subsidiaries are dormant. Financial transactions between South Yorkshire Housing Association Limited and its subsidiary entities consist of: Transaction
Cost in year £’000
Balance at year end £’000
Rents
1,114
Creditor: £nil
Voids
(7)
Debtor: £348
Service charges
19
Sundry income
37
Maintenance
(286)
Management
(113)
Services
(19)
Arrears movement
(1)
Major repairs
(76)
Sales and marketing the Association’s properties
95
Management of the Association’s intermediate rented properties and Buy to Let properties
109
Provision of Finance, HR and IT services to SYHA Enterprises
40
Property rental from SYHA
10
Regulated subsidiary Alliance HA (SY) Ltd
Non-regulated subsidiary SYHA Enterprises Ltd
Creditor: £17 Debtor: £16
Other related parties Board members 26.
£nil
Controlling party
The parent and the ultimate controlling party of the group is South Yorkshire Housing Association Limited. 27.
Explanation of transition to FRS 102
This is the first year that the Group has presented its financial statements under Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council. The following disclosures are required in the year of transition. The last financial statements under previous UK GAAP were for the year ended 31 March 2015 and the date of transition to FRS 102 was therefore 1 April 2014. As a consequence of adopting FRS 102, a number of accounting policies have changed to comply with that standard. In carrying out the transition to FRS 102, the Group has applied the following exemptions as permitted by Section 35 Transition to this FRS
69
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements Business combinations The group has elected not to apply Section 19 Business Combinations and Goodwill to business combinations that were effected before the date of transition to FRS 102. No adjustments have been made to the accounting treatments adopted at that time. Group Reconciliation of net assets and reserves at 1 April 2014 for the Group - date of transition to FRS 102 UK GAAP previously reported Fixed assets Intangible assets Housing properties Social Housing Grant and other grants (net of amortisation) Other tangible fixed assets Investments Current assets Inventories First tranche shared ownership Trade and other receivables Cash
Effect of transition into FRS 102
FRS 102
£’000
Alliance £’000
SYHA £’000
£’000
627 298,489 (159,760)
3,556
91 (7,476) 156,204
718 291,013 -
2,746 4,050
-
-
2,746 4,050
62 400 4,971 18,322
-
-
62 400 4,971 18,322
Total assets
169,907
Current liabilities Trade and other payables Loans and borrowings Derivative financial instruments
(10,200) -
-
(95) -
(10,295) -
Non-current liabilities Loans and borrowings Pension Liability Deferred income
(132,706) (601) -
(3,556)
(6,032) (144,496)
(132,706) (6,633) (148,052)
Total liabilities
(146,507)
-
-
(297,686)
Net assets
26,400
Equity Share capital Revenue reserve Revaluation reserve Designated reserve Total equity
25,158 327 915 26,400
322,281
24,595 -
(1,736) (69) -
23,422 258 915 24,595
70
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements Reconciliation of net assets and reserves at 1 April 2015 for the Group UK GAAP previously reported Fixed assets Intangible assets Housing properties Social Housing Grant and other grants (net of amortisation) Other tangible fixed assets Investments Current assets Inventories First tranche shared ownership and Property held for sale Trade and other receivables Cash
Effect of transition into FRS 102
FRS 102
£’000
Alliance £’000
SYHA £’000
£’000
738 306,984 (160,575)
3,545
349 (8,338) 157,030
1,087 298,646 -
2,744 4,637
-
(349) -
2,395 4,637
55 921
-
-
55 921
2,486 11,999
-
-
2,486 11,999
Total assets
169,989
322,226
Current liabilities Trade and other payables Loans and borrowings Derivative financial instruments
(10,231) -
-
(105) -
(10,336) -
Non-current liabilities Loans and borrowings Pension Liability Deferred Income
(129,958) (876) -
(3,520)
(7,708) (143,846)
(137,666) (876) (147,366)
Total liabilities
(141,155)
(296,244)
Net assets
28,924
25,982
Equity Share capital Revenue reserve
28,924
Total equity
28,924
25
(2,967)
25,982 25,982
71
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements Group Reconciliation of total comprehensive income for the year ended 31 March 2015 UK GAAP previously reported Turnover Cost of Sales Operating expenditure Operating surplus Gain / (loss) on disposal of property, plant and equipment Interest receivable Interest and financing costs Surplus for the year
Effect of transition into FRS 102
FRS 102
£’000 43,688
Alliance £’000 36
SYHA £’000 1,476
£’000 45,200
(284) (37,126)
(11)
(2,463)
(284) (39,600)
6,278
5,316
711
-
-
711
236 (4,776)
-
(204)
236 (4,980)
2,449
1,283
Other comprehensive income: Unrealised surplus / (deficit) on revaluation of housing properties
-
-
374
374
Actuarial (loss) / gain in respect of pension schemes Total comprehensive income for the year
-
-
29
(270)
2,150
25
(788)
1,387
72
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements Association Reconciliation of net assets and reserves at 1 April 2014 for the Association - date of transition to FRS 102 UK GAAP previously reported
Effect of transition into FRS 102 Housing Properties
Fixed assets Intangible assets Housing properties Social Housing Grant and other grants (net of amortisation) Other tangible fixed assets Investments Current assets Inventories First tranche shared ownership and Property held for sale Trade and other receivables Debtors >1year Cash Total assets Current liabilities Trade and other payables
Pensions
FRS 102
£’000
£’000
Intangible Fixed Assets £’000
Revaluation Reserve
284,359 (156,204)
(7,476) 156,204
91 -
-
91 276,883 -
2,741 4,050
-
-
-
2,741 4,050
62 400
-
-
-
62 400
5,102 73 17,635
-
-
-
5,102 73 17,635
£’000
Annual leave £’000
158,218
£’000
307,036
(9,828)
-
-
-
Non-current liabilities Loans and borrowings Pension Liability Deferred income
(121,375) (601) -
(144,496)
-
(6,032) -
Total liabilities
(131,804)
(282,427)
Net assets
26,414
24,609
Equity Share capital Revenue reserve Revaluation reserve Designated reserve
25,287 212 915
Total equity
26,414
4,232 -
91 -
(6,032) -
(95)
(9,923)
(121,375) (6,633) (144,496)
69 (69) -
(95) -
23,551 143 915 24,609
73
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements Reconciliation of net assets and reserves at 1 April 2015 for the Association - date of transition to FRS 102 UK GAAP previously reported
FRS 102
Housing Properties
Fixed assets Intangible assets Housing properties Social Housing Grant and other grants (net of amortisation) Other tangible fixed assets Investments Investment in subsidiary Current assets Inventories First tranche shared ownership and Property held for sale Trade and other receivables Cash Total assets Current liabilities Trade and other payables
Intangible Fixed Assets £’000
Pensions
Annual leave
£’000
Revaluation Reserve £’000
£’000
£’000
£’000
£’000
293,096 (157,030)
(8,338) 157,030
349 -
-
-
-
349 284,758 -
2,734 4,637 894
-
(348) -
-
-
-
2,386 4,637 894
55 786
-
-
-
-
-
55 786
2,413 11,453
-
-
-
-
-
2,413 11,453
159,038
307,815
(9,957)
-
-
-
-
(105)
(10,061)
Non-current liabilities Loans and borrowings Pension Liability Deferred Income
(119,156) (876)
(143,846)
84 -
(7,793) -
-
-
(119,072) (8,670) (143,846)
Total liabilities
(129,989)
(281,733)
Net assets
29,049
26,082
Equity Share capital Revenue reserve Total equity
29,049 29,049
4,847
84
(7,793)
-
(105)
26,082 26,082
74
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements Reconciliation of total comprehensive income for the year ended 31 March 2015
Turnover Cost of sales Operating expenditure Operating surplus Gain / (loss) on disposal of property, plant and equipment Interest receivable Interest and financing costs Change in fair value of financial instruments Surplus for the year Other comprehensive income: Unrealised surplus / (deficit) on revaluation of housing properties
Housing Properties
Pensions
Annual leave £’000
Revaluation Reserve £’000 -
£’000 42,238
£’000 1,476
£’000 -
£’000 43,714
(298) (36,069)
(861)
(1,592)
(10)
-
(298) (38,532)
5,871
4,884
711
-
-
-
-
711
233 (4,255)
-
(204)
-
-
233 (4,459)
2,560
1,369
-
-
-
-
Actuarial (loss) / gain in respect of pension schemes
(299)
-
(29)
-
Change in fair value of hedged financial instruments
-
-
-
-
Total comprehensive income for the year
2,261
374
374 (270)
1,473
75
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 Housing Properties Amortisation of Government Grant FRS 102 requires Government and other grants to be recognised net of amortisation under deferred income in the liabilities section of the Statement of Financial Position, with amortisation credited to the Statement of Comprehensive Income. Financial Instruments Amortisation of transaction costs FRS 102 requires initial transaction costs associated with obtaining loan funding to be capitalised and amortised over the life of the financial instrument. The amount of £147k is therefore recognised net of accumulated amortisation on the opening Statement of Financial Position, with amortisation charged annually to the Statement of Comprehensive Income. Pensions Multi-employer defined benefit pension scheme Under previous UK GAAP the Social Housing Pension Scheme, a multi-employer defined benefit pension scheme of which South Yorkshire Housing Association is a member, was accounted for by the Group as a defined contribution scheme. It is not possible for the Group to obtain sufficient information to enable it to account for the scheme as a defined benefit scheme and so continues to account for the scheme as a defined contribution scheme. Where the scheme is in deficit and where the Group has agreed to a deficit funding arrangement the group now recognises a liability for this obligation. The amount recognised is the net present value of the deficit reduction contributions payable under the agreement that relates to the deficit. The unwinding of the discount rate is recognised as a finance cost This adjustment has resulted in a decrease to the opening reserves position of £6,032k. In the year to 31 March 2015 an additional charge of £1,761k was recognised in surplus or deficit in the Statement of Comprehensive Income and the liability at 31 March 2015 was £7,764k. Defined benefit pension scheme Under previous UK GAAP the company recognised an expected return on defined benefit plan assets in the Income and expenditure account. Under FRS 102 a net interest expense, based on the net defined benefit liability, is recognised in surplus or deficit in the statement of Comprehensive Income. There has been no change in the defined benefit liability at either 1 April 2014 or 31 March 2015. The effect of the change has been to reduce the credit to the Surplus for the year in the year to 31 March 2015 by £29k and increase the credit in other comprehensive income by an equivalent amount. Revaluation of fixed asset investments Under previous UK GAAP, changes to the fair value of fixed asset investments were credited to the revaluation reserve. FRS 102 requires such amounts to be credited to the Statement of Comprehensive Income. In the year to March 2015 there was a net positive revaluation of £374k and in the year to March 2016 there was a net positive revaluation of £16k. Holiday pay accrual FRS 102 requires short term employee benefits to be charged in surplus or deficit to the Statement of Comprehensive Income as the employee service is received. This has resulted in the Group recognising a liability for holiday pay of £95k on transition to FRS 102. Previously holiday pay accruals were not recognised and were charged to the Income and Expenditure account as they were paid. In the year to 31 March 2015 an additional charge of £10k was recognised in the Statement of Comprehensive Income and the liability at 31 March 2015 was £105k. Other Adjustments arising on transition to FRS 102 In addition to the transition adjustments identified above which affect the surplus for the financial year, the following adjustments have arisen which have had no effect on net reserves or Statement of Comprehensive Income but which have affected the presentation of these items on the Statement of Financial Position. The main items are: 76
SOUTH YORKSHIRE HOUSING ASSOCIATION AND ITS SUBSIDIARIES Notes to the Financial Statements For the year ended 31 March 2016 (a) Computer software, with a net book value of £349k at 1 April 2014, has been reclassified from tangible to intangible assets as required under FRS 102. This has no effect on the Group’s net assets nor on the surplus for the year, except that the previous depreciation charge in now described as amortisation. (b) Statement of cash flows The Group’s cash flow statement reflects the presentation requirements of FRS 102, which is different to that prepared under FRS 1. In addition the cash flow statement reconciles to cash and cash equivalents whereas under previous UK GAAP the cash flow statement reconciled to cash. Cash and cash equivalents are defined in FRS 102 as ‘cash on hand and demand deposits and short term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value’ whereas cash is defined in FRS 1 as ‘cash in hand and deposits repayable on demand with any qualifying institution, less overdrafts from any qualifying institution repayable on demand’. The FRS 1 definition is more restrictive.
77
78