REPORT & Financial StatementS. GreenSquare Group Limited

Transcription

1 REPORT & Financial StatementS GreenSquare Group Limited 12

2 GREENSQUARE GROUP LIMITED REPORT AND FINANCIAL STATEMENTS Year ended 31 March

3 REPORT AND FINANCIAL STATEMENTS CONTENTS BOARD MEMBERS, EXECUTIVE DIRECTORS, ADVISORS AND BANKERS 1 CHAIR S STATEMENT 2 REPORT OF THE BOARD 4 OPERATING AND FINANCIAL REVIEW 9 INDEPENDENT AUDITOR S REPORT 16 GROUP INCOME AND EXPENDITURE ACCOUNT 17 ASSOCIATION INCOME AND EXPENDITURE ACCOUNT 17 STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS 18 NOTE OF HISTORICAL COST SURPLUSES AND DEFICITS 18 RECONCILIATION OF MOVEMENT IN FUNDS 18 GROUP BALANCE SHEET 19 ASSOCIATION BALANCE SHEET 20 GROUP CASH FLOW STATEMENT 21 22

4 BOARD MEMBERS, EXECUTIVE DIRECTORS, ADVISORS AND BANKERS Board: Chair Vice Chair Other Members Hilary Gardner Wendy Hall Derek Cash Alice Copping Angie Clapp (from 27 September ) Bill Fishlock Paul McLaughlin Helena Taylor Knox Eleanor Thompson Pearl Peckham (to 27 September ) David Ashmore - co-opted annually Executive Directors: Chief Executive Executive Director (Finance) Executive Director (Organisational Development and Corporate Services) Executive Director (Development) Executive Director (Place) Executive Director (Customers and Communities) Executive Director (Commercial Services) Group Director of Finance and IT Group Director of Development Managing Director of Oxford Citizens Housing Association Ltd Managing Director of Westlea Housing Association Ltd Executive Director (Organisational Development and Corporate Services) Secretary: Registered office: Registered numbers: Industrial and Provident Society Homes and Communities Agency External auditors: D Ashmore T Jackson (from 1 November ) C Dixson (from 1 March ) V O Brien (from 1 November ) A Smith (from 1 November ) A Cornelius (from 1 November ) T Pritchard (from 1 November ) T Jackson (to 31 October ) V O Brien (to 31 October ) A Smith (to 31 October ) Ann Cornelius (to 31 October ) L Whordley Hughes (from 1 November to 29 February ) L Whordley Hughes (to 29 February ) C Dixson (from 1 March to 31 March ) M Arnold (from 1 April ) Barbury House Stonehill Green Swindon SN5 7HB No R No. L4515 Grant Thornton UK LLP Chartered Accountants Victoria Street Bristol, BS1 6FT Principal solicitors: Anthony Collins 134 Edmund Street Birmingham B3 2ES Bevan Brittan Blake Lapthorn Kings Orchard Tarlo Lyons 1 Queens Street Harbour Court Bristol Compass Road BS2 0HQ Portsmouth 1

5 CHAIR S STATEMENT I am delighted to present my Chair s statement for the financial year ending 31 March. Throughout this past year we have been working toward the amalgamation of Westlea and OCHA into a new charitable registered provider, GreenSquare Homes. Regrettably, due the continued turmoil and uncertainty in the financial markets it has not been possible to realise full amalgamation. However, we have remained committed to the outcomes we were looking to achieve through amalgamation, namely to strengthen the position of residents at the most important local level whilst streamlining our governance structure generally as part of our drive for better value for money across the Group. The review of our governance structure has allowed us to consider how we can really deliver innovative resident involvement in the strategic decision making of the business. We have therefore established three Communities Boards designed to be led by residents. These Boards are committees of the main Board with delegated powers and budgets. They make sure that the services and how the neighbourhoods run are kept under close review, allocating funding to support community projects and feeding local information into Board discussions. At the same time and to support our governance changes, we have restructured our staff teams to operate more at a local neighbourhood level whilst benefitting from the consistency of Group wide policies and procedures. In addition we have set up the GreenSquare Academy which supports and trains Board members to deliver their roles more effectively, and to act as a training resource for other residents who may one day feel able to commit to Board membership. These changes have been resource intensive and often frustrating but overall it has been a rewarding process which is already starting to deliver some positive results. Meanwhile we have continued as a business to deliver very much business as usual and are pleased and proud this year to have again produced some excellent achievements. Achievements we are particularly proud of include: We continue to enjoy our position as an investment partner with the HCA and signed a 3 year agreement with them this year to deliver 622 homes for affordable housing and 246 homes for sale by We were one of a small number of registered providers and local authorities invited to work with the DWP in one of their demonstration projects to assess the impact and practical implications of paying housing benefit directly to tenants We completed our first scheme with Kevin McCloud in Swindon and started on site with our second such scheme in Stroud in January. Three sites in Oxford are currently at planning stage. Two of our community projects won Regional awards in the National Housing Federation s What we are Proud of Awards. We completed the purchase of GW Sparrow & Company Ltd a gas and renewable energy business based in Swindon. Initial integration has gone extremely well and our growth plans for the business centre round gas servicing and renewable energy. Our financial performance has also been excellent. In summary, the Group turnover is now 48.5m and the retained surplus for the year was 1.8m which will help fund improved services to residents and build more new homes. These results are after the key change in accounting requirements for the Group to identify and separately account for the major components which make up its housing property assets. 2

6 Finally none of these things would happened without the effort, skill and hard work of all our staff who have achieved such excellent results in what has been another challenging year. I would also like to thank all my fellow Board members too for the support and dedication they have given to GreenSquare this year. It really is a team effort. As I was last year, I am confident that even with the many challenges that we face as a sector, especially as the Government s Welfare Reforms start to impact both our residents and consequently our business, GreenSquare is well placed to continue to go from strength to strength. Hilary Gardner Chair 17 July 3

7 REPORT OF THE BOARD The Board of GreenSquare Group Limited is pleased to present its report together with the audited financial statements for the year ended 31 March. GreenSquare Group ( the Group ) comprises GreenSquare group Ltd (the Association) and its subsidiaries Westlea Housing Association Limited ( Westlea ), Oxford Citizens Housing Association Limited ('OCHA'), Oakus Estates Limited ('Oakus'), Tidestone Limited ( Tidestone ) and GW Sparrow & Company Limited ( Sparrow ). The financial statements are prepared on a group basis thus reflecting activities of the subsidiary companies as well as the Association. Principal activities GreenSquare is a not-for-profit organisation overseen by a Management Board. Its subsidiaries provide and manage affordable rented housing and develop private housing for rent and sale. As well as managing over 10,200 properties, GreenSquare is a major developer of new affordable housing and is a lead development partner under the Homes and Communities Agency (HCA) National Affordable Housing Programme. During the year, the group employed 383 staff on a full time equivalent basis. Any surpluses made by the subsidiaries are retained within the group. GreenSquare is a major provider of housing, regeneration, care and support and commercial services across Wiltshire, Oxfordshire, Gloucestershire and the surrounding areas. Business review and future developments Details of the group s performance for the year and factors likely to affect its future development are contained within the Operating and Financial Review that follows this report. Efficiency The Board is committed to delivering an effective and efficient service to residents and other stakeholders and uses a range of strategies to increase efficiency including re-evaluating procurement policies, partnering with contractors for new build and reducing staff turnover, sickness and absenteeism. Employees Our people are the key to our success. We aim to be an employer of choice in the area in which we work, and are proud to hold the Investors In People silver accreditation. We are serious about investing in our people and offer fantastic training and development opportunities. Resident involvement The involvement of our residents is pivotal in how we shape and develop our services. We have Resident Board members, a ground-breaking Resident Scrutiny Panel and a District Forum. Health and safety The Board is very much aware of its responsibilities on all matters relating to health and safety. The governance arrangements around Health and Safety have been reviewed and the decision taken to move forward with a single Group committee on Health and Safety. The group has adopted robust health and safety policies and provides Board and staff training and education on health and safety matters. 4

8 REPORT OF THE BOARD continued Board members and executive directors Those Board members who served during the period and the group s executive directors are set out on page 1. GreenSquare provides a range of central services governance, finance, development, human resources and information technology to its subsidiaries, under the scope of an intra-group agreement. The executive directors are the Chief Executive and other members of the group s senior management team. They act as executives within the authority delegated by the Board and have been employed directly by GreenSquare, providing services via this intra group agreement. Following a group management restructure, the role of managing directors has been withdrawn and the roles are now undertaken by Executive Directors of the Group. L Whordley Hughes, corporate services director, resigned during the year and and T Pritchard was appointed executive director of commercial services on 1 November and C Dixson joined the group as executive director organisational development and corporate services on 1 March. The other executive directors served throughout the year. The Chief Executive holds no interest in the Association's shares and has been co-opted to, and acts within, the authority delegated by the Board. The group has insurance policies which indemnify its Board members and executive directors against liability when acting for the Association. The Board The Board comprises up to twelve non-executive members and is responsible for the group and Association's strategy and policy framework and managing the affairs of the group. The Board members are drawn from a wide background bringing together professional, commercial and local experience. The Board delegates the day-to-day management and implementation of that framework (via the intra group agreement) to the Chief Executive and other members of the group s executive team. Board Membership Throughout the past year we have been reviewing our governance structures, and following detailed legal advice the group has implemented co-terminous arrangements whereby, as from 1 April, the parent Greensquare has appointed common board members across GreenSquare, Westlea and OCHA. This was agreed unanimously by the Boards of Westlea and OCHA as being a practical way of achieving one of the outcomes of our review to streamline our governance structure. As corporate entities, the subsidiaries have delegated all their powers and functions to the parent. The review of our governance structure has also allowed us to consider how we can really deliver innovative resident involvement in the strategic decision making of the business. We have therefore established three communities boards designed to be led by residents. In order to achieve a level of continuity, membership of these boards is made up of existing members of the Westlea and OCHA Boards along with a number of new resident and independent members who were selected following an open and robust selection process. The Communities Boards are committees of the main board with delegated powers and budgets. They make sure that the services within their respective neighbourhoods are kept under close review, allocating funding to support community projects and feeding local information into Board discussions. The review has at times been a difficult and frustrating process and the Board notes its gratitude and appreciation of the commitment and selflessness shown by all Board members across who have been involved. Independent and Tenant Board members are selected by a panel of Board members (including the Chair and the Chief Executive) following public advertisement for recruitment. 5

9 REPORT OF THE BOARD continued Remuneration policy The Remuneration Committee, comprising the Chair and a minimum of two other Board members, is responsible for setting the group's remuneration policy for its executive directors and other staff. The Committee pays close attention to remuneration levels in the sector in determining the remuneration packages of the executive directors. Basic salaries are set having regard to each executive director s responsibilities and pay levels for comparable positions. Service contracts The executive directors are employed on the same terms as other senior managers - their notice periods are three months. Pensions The executive directors are members of either the Social Housing Pension Scheme or the Wiltshire County Council Pension Fund, both defined benefit (final salary) pension schemes. They participate in the schemes on the same terms as all other eligible staff and the group contributes to the schemes on behalf of its employees. Other benefits The executive directors are entitled to other benefits such as the provision of cash allowancs in lieu of a company car. Full details of their individual remuneration packages are included in note 12 to the audited financial statements. Statement of the Responsibilities of the Management Board for the Report and Financial Statements The Board is responsible for preparing the report and financial statements in accordance with applicable law and regulations. Industrial and Provident Society legislation requires the Board to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under the Industrial and Provident Society legislation the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and surplus or deficit of the association and group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards and the Statement of Recommended Practice (SORP) Accounting by Registered Housing Providers update 2010, have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the group and Association and enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to It is also responsible for safeguarding the assets of the Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the directors are aware: there is no relevant audit information of which the association's auditors are unaware; and the directors have taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The directors are responsible for the maintenance and integrity of the corporate and financial information on the group s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 6

10 REPORT OF THE BOARD continued NHF Code of Governance The Association complies with the principal recommendations of the NHF Code of Governance (revised) and has adopted a number of policies and procedures to help achieve these objectives. Internal controls assurance The Board acknowledges its overall responsibility, applicable to all organisations within the group, for establishing and maintaining the whole system of internal control and for reviewing its effectiveness. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and to provide reasonable, and not absolute, assurance against material misstatement or loss. The process for identifying, evaluating and managing the significant risks faced by the Association is ongoing and has been in place throughout the period commencing 1 April up to the date of approval of the annual report and financial statements. Key elements of the control framework include: Board approved terms of reference, including a detailed intra-group agreement between the Association and its subsidiaries, supported by detailed service level agreements and delegated authorities for audit and remuneration committees; clearly defined management responsibilities for the identification, evaluation and control of significant risks; robust strategic and business planning processes with detailed financial budgets and forecasts; review of the Association s risks by the Board and Group Audit Committee; formal recruitment, retention, training and development policies for all staff; established authorisation and appraisal procedures for all significant new initiatives and commitments; appraisal of major development projects by the Group Development Committee; a sophisticated approach to treasury management which is subject to external review on a regular basis; regular reporting to senior management and the Board/appropriate committee of key business objectives, targets and outcomes; Board approved whistleblowing, disciplinary and capability policy which covers expectations of fraud and code of conduct; detailed policies and procedures in each area of the Association s work; and regular monitoring of loan covenants and requirements for new loan facilities. A fraud register is maintained and is reviewed by the Group Audit Committee at every meeting. During the year there was a minor alleged fraud reported within a subsidiary's direct works dept. An internal review was undertaken and the outcome reported to the Group Audit Committee in April. There were no other frauds reported during the period under review. The Board cannot delegate ultimate responsibility for the system of internal control but has delegated authority to the Group Audit Committee to regularly review the effectiveness of the system of internal control. The Group Audit Committee was formed to oversee the internal control framework for all companies within the group. The means by which the Group Audit Committee reviews the effectiveness of the system of internal control include considering risk reports, internal audit reports, fraud reports, management assurances, the external management letter and specialist reviews on areas such as treasury, health and safety, and efficiency. The Group Audit Committee received and considered reports from management on these risk management and control arrangements at each meeting during the year and the Board received its risk report quarterly during the year. 7

11 REPORT OF THE BOARD continued The Group Audit Committee has received the Chief Executive s and Executive Director of Finance annual review of the effectiveness of the system of internal control for the group, and the annual report of the internal auditor, and has reported its findings to the Board. Going concern The group s business activities, its current financial position and factors likely to affect its future development are set out within the Operating and Financial Review. The group has in place long-term debt facilities (including 65.9 million of undrawn facilities at 31 March ), which provide adequate resources to finance committed reinvestment and development programmes, along with the group s day to day operations. The group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders covenants. After making enquiries the Board has a reasonable expectation that the Association has adequate resources to continue in operational existence for the foreseeable future, being a period of twelve months after the date on which the report and financial statements are signed. For this reason, it continues to adopt the going concern basis in the financial statements. Annual General Meeting The annual general meeting will be held on 25 September. Auditors A resolution to reappoint Grant Thornton UK LLP as auditors will be proposed at the forthcoming Annual General Meeting. The report of the Board was approved on 17 July and signed on its behalf by: H Gardner Chair 8

12 OPERATING AND FINANCIAL REVIEW - HIGHLIGHTS - FIVE YEAR SUMMARY For the year ended 31 March Restated* Group Income and Expenditure account '000 '000 Total turnover 48,516 44,975 45,341 45,681 44,602 Income from lettings 44,243 41,739 41,170 38,970 37,811 Operating surplus 11,325 9,965 10,285 8,913 7,961 Surplus for the year after tax 1, ,070 1,039 2,217 Group Balance Sheet Housing properties net of capital grants and depreciation 384, , , , ,881 Net current assets/(liabilities) 3,267 (4,169) 4,291 6,889 5,712 Loans (due over one year) 236, , , , ,116 Provisions Net pension liability 6,381 4,978 10,135 4,604 2,457 Reserves : revenue 34,111 32,505 23,373 26,003 26,275 : designated : revaluation 115, , ,294 89,322 90,563 : total 149, , , , ,890 Accommodation figures Total housing stock managed at year end (number of units): 10,264 9,935 9,880 9,533 9,290 In development * The results prior to 31 March have not been restated to reflect the introduction of the 2010 Statement of Recommended Practice. Further details of this change are set out in note 33. 9

13 OPERATING AND FINANCIAL REVIEW Activities GreenSquare Group is a major provider of housing, regeneration, care and support and commercial services across Wiltshire, Oxfordshire, Gloucestershire and the surrounding areas. We have the following key business streams: general needs housing for rent, primarily by families who are unable to rent or buy at open market rates; supported housing and housing for older people who need additional housing-related support or additional care; low-cost home ownership, primarily shared ownership whereby residents purchase a share in the equity of their homes and pay rent to the Association on the remainder; development construction services provided by our in house subsidiary, Tidestone leading to value for money savings and the potential for any profits to be reinvested in the group s charitable activities; and property investment and maintenance of public open spaces undertaken by our commercial subsidiary Oakus. As well as managing over 10,200 properties, we are a major developer of new affordable housing and a lead development partner under the Homes and Communities Agency (HCA) National Affordable Housing Programme (NAHP). The group s focus remains on on its social housing activities and these are expected to continue to constitute over 90% of the Group s activities by turnover. Business and financial review The Board is pleased to report a Group surplus for the year after tax of 1.8million ( restated: 0.8million) in what has been a challenging year. We have continued to invest in both our existing housing stock and undertake a series of new developments, for both sale and rent. The Group was successful in its bid to the Affordable Homes Programme -15 and we started our first development under this scheme in the year. After transfers the Group s reserves stand at 150.0million ( restated: 135.8million). On the 19 July one of the Group s subsidiaries acquired 100% of GW Sparrow & Company limited, a gas servicing and installation company and 9 months results are consolidated in these accounts (note 32). The Group has adopted the Statement of Recommended Practice (SORP) Accounting by Registered Social Housing Providers Update 2010 for the first time this year. The key change has been the requirement for the group to identify and separately account for the major components which make up its housing property assets. Prior period balances have been adjusted to reflect this implementation which has resulted in a decrease in total Group reserves at 31 March of 4.6 million (note 33). There were no other significant changes to accounting policies in the current year. Objectives and strategy The group s objectives and strategy are set out in a business plan that is reviewed and approved by the Board each year. The Board is committed to delivering an effective and efficient service to residents and other stakeholders and achievement of group objectives will also depend on successful implementation of a range of strategies to increase efficiency. 10

14 OPERATING AND FINANCIAL REVIEW continued Value for money We are committed to delivering Value for Money in all aspects of our services. During the year we have agreed a new Value for Money Strategy, designed not only to meet the expectations of government and the regulator but also to enable us to maintain our financial strength and free up resources to improve services to tenants as well as build more affordable housing. In the first year of this new approach we have also focussed on securing savings through more effective procurement processes not only to reduce costs but also improve quality. We have engaged a firm of external consultants to carry out a review of our major contracts and our approach to procurement. Our asset management strategy will ensure we are making the most of our housing stock considering areas such as the redevelopment of certain schemes, tackling hard to let properties, exploiting our land holdings and garage sites and providing incentives to release under occupied properties to people in over occupied accommodation. We will engage and consult with our key stakeholders to maximise benefits and minimise disruption and concern. Senior management and the Board have developed a series of key performance indicators (KPI s) to monitor performance and have set a target of 5% savings and efficiency before accounting for growth and inflation which has been built into our budgets and business plan. Performance and development Finance The Board agrees targets each year that are designed to manage development and deliver continuous service improvement. In a gloomy economic climate and depressed housing market, the Board had set a challenging budget for the year. Planned rental increases were as required under the Tenant Services Authority (TSA) guidance on rent restructuring and we anticipated increases in staff costs, due primarily to recruitment and increases in pension contributions and national insurance, as well as higher repair costs than in previous years. We have continued to generate small surpluses from property sales, principally shared ownership and are pleased to report that the Group made a surplus before tax of 2.1m for the year ( restated: 0.9m). Our financial performance has meant we have met lenders covenants. At the year-end total Group funds amounted to 150.0m ( restated: 135.8m). Further details of reserves transfers are shown in note 26 to the financial statements. Key factors influencing these results were: The Group transferred 336 new properties into management during the year and there are 217 more properties on site in development. As a result of the increased levels of development, borrowings increased from 211.8m at the beginning of the year to 237.7m as at 31 March. The Wiltshire County Council Pension Scheme pension deficit increased by 1.2m during the year, to leave the deficit at 6.1m as at 31 March. The continuing reduction in temporary accommodation. The adoption of the Statement of Recommended Practice (SORP) Accounting by Registered Social Housing Providers Update 2010 requiring the Group to identify and separately account for the major components which make up its housing property assets. See note 33. The Group s 100% acquisition of GW Sparrow & Company limited, a gas servicing and installation company. See note 32. The Board appointed external professional valuers to undertake a valuation as at 31 March of the housing properties which had not previously been subject to professional revaluation. The value of these properties, on an existing use value for social housing basis, was 66.4m and this has been reflected in the valuation of properties in the financial statements. The surplus of 13.9m over the carrying value has been taken to the property revaluation reserve 11

15 OPERATING AND FINANCIAL REVIEW continued The Group has net current assets of 3.3m and manages its working capital around the loan facility. As at 31 March, 65.9m was available for drawdown against the current value of charged housing properties. The Group remains committed to an increased investment in our front line customer services and also resident and community development activities. Development We have exceeded our development targets with 336 new homes transferred into management during the year. This enabled us to meet the development requirements of the HCA Programme during the year. Asset management The proportion of our general needs, housing for older people and supported housing properties meeting the Decent Homes Standard is now at over 99.9%, and is just below our target (100%). Total expenditure on repairs and maintenance amounted to 12.8m ( restated: 12.5m) for the year, including 3.3m (: 3.0m) for capitalised works to existing properties, which have been financed principally from internally generated funds. Customer service Our performance against key performance indicators is summarised in the individual subsidiary financial statements. The group approach to performance management includes an outcome focussed business plan with clear targets and indicators of success summarised in a balanced scorecard, reported regularly to the Board and senior management. The main indicators for next year are shown below: Actual surplus to be higher or equal to the budgeted surplus Overall satisfaction with our service to be in the top quartile compared to our peers Overall satisfaction with last contact to exceed 80% Overall satisfaction with repairs and maintenance to be maintained at 85% 100% emergency repairs and 97% of urgent and routine repairs to be completed within target times Tenants believing rent is good value for money to exceed 80% Empty general needs properties to be re let in under 25 days Pipeline of new homes to be over 400 Staff satisfaction with GreenSquare as an employer to be maintained at 85% Risks and uncertainties The main risks that may prevent the group achieving its objectives are considered and reviewed quarterly by the senior management team and Board as part of the corporate planning processes. The risks are recorded and assessed in terms of their impact and probability. Major risks, presenting the greatest threats to the group, are reported to the Group Audit Committee together with action taken to manage the risks and the outcome of the action. These risk reports include assessments of key controls used to manage the risks. The major risks to successful achievement of the Group s objectives are considered below. Key risk Current economic climate and impact on public sector funds and the housing market The continued restraints on government spending, changes to the housing benefit rules, along with the wider economic downturn, have been identified as key risks to the group. Such changes are likely to impact on the group's ability to deliver its planned development programme and may also affect core activities. Action being taken regular review of business plan to ensure that the Group has adequate resources to deliver committed activities and development monitoring rental arrears and working closely with tenants to recover these on a timely basis reviewing our cost base to identify cost savings where possible 12

16 OPERATING AND FINANCIAL REVIEW continued Delivery of development programme Successful delivery of the programme depends on continued support from the HCA for the Group, as well as the ability and willingness of development contractors to continue to build our schemes in a challenging economic environment. Availability of finance Availability of loan finance is key to a thriving housing market. Potential impact on the Group's ability to deliver its development programme as well as difficulty for potential shared ownership purchasers to raise finance. Low demand for housing properties developed for sale The Group s development programme includes low cost home ownership. Success depends on demand for the properties. Low demand in the housing market generally has an impact on low cost home ownership schemes. maintaining regular contact with the HCA on the development programme enhancing credit checks on new contractors and re-assessing existing contractors monitoring progress of schemes under development, with regular meetings with contractors regular communication with lenders to maintain strong relationships close monitoring of lenders covenants, reported to the board each month negotiating new facilities well in advance of need continual review of planned developments. Removing potential low cost home ownership schemes where these may be slow to sell re-appraising planned schemes to offer alternative forms of tenure. Rise in final salary pension scheme liabilities become unaffordable The Group could face significant liabilities for meeting pension fund deficits. The Group s contributions to the fund may need to increase significantly in order to fund the scheme. Change in government policy or new legislation Such changes could have significant impact on the sector and therefore the operations of the Group e.g. changes to the planning or tax regimes may increase costs of new developments reducing scheme affordability. Performance failure Performance failures in services to our customers would affect our rating with the HCA and our reputation in the sector. Failure to deliver our development programme may result in a withdrawal of capital grant. Loss of key staff Retention of quality staff and managers is key to successful delivery of our business plans. improved marketing techniques exposure regularly monitored through review of valuations and discussions with actuarial professionals staff maintain close contact with key external bodies to ensure any changes are fully understand before they are acted upon by the group regular customer satisfaction surveys carried out and performance monitored development programme monitored on an on-going basis. Any issues discussed with HCA as early as possible staff development programme, including regular performance appraisals, implemented and monitored staff satisfaction survey carried out annually 13

17 OPERATING AND FINANCIAL REVIEW continued Financial position The income and expenditure account and balance sheet are summarised on page 9 and the following paragraphs highlight key features of the Group s financial position at 31 March : Accounting policies The Group s principal accounting policies are set out on pages 22 to 25 of the financial statements. The policies that are most critical to the financial results relate to accounting for housing properties and include: capitalisation of interest and development administration costs; deduction of capital grant from the cost of assets; housing property depreciation; and treatment of shared ownership properties. Housing properties At 31 March the Group managed 10,264 housing properties (: 9,935). The properties were carried in the balance sheet at 384.5m ( restated: 350.6m) including 4.0m in respect of Oakus s properties. Our investment in housing properties this year was funded through a mixture of social housing grant, loan finance and working capital where we continue to show a strong current asset balance. The group s treasury management arrangements are considered below. Pension costs The Group participates in three pension schemes, the Social Housing Pension Scheme (SHPS), the Wiltshire County Council Pension Scheme (WCCPS) and the Oxfordshire County Council Pension Fund (OCCPF). The latter as a result of the TUPE transfer of staff with the Oxford City support contract with OCHA. The SHPS scheme is a final salary scheme for those staff in the scheme at 31 March 2007 and a Career Average Related Earnings (CARE) scheme for all new employees. The WCCPS and OCCPF are final salary schemes. The Group has contributed to the schemes in accordance with the levels set by the actuaries of between 12.9% and 14.8% for SHPS, 31.6% for WCCPS and 19.3% for OCCPF. Capital structure and treasury policy We adopt a conservative approach to treasury management. No derivatives are used and the Board seeks independent advice from external consultants along with quarterly reports from officers on treasury and investment performance. The Group borrowed a further 26.6m during the year, to continue to develop general family housing. By the year end loans amounted to 237.7m. Of this, approximately 80% of debt was fixed at an average interest rate of 4.9%, with the remaining floating debt at an average interest rate of 2.1%. Total interest costs for the group were 10.6m for the year (: 9.8m). The Group aims to fix at least 60% of its debt, with maturities spread over the medium term. The Group borrows and lends only in sterling and is not exposed to currency risk. The Group s lending agreements require compliance with a number of financial and non-financial covenants. The group s position is monitored on an on-going basis and reported to the board each quarter. Our financial performance has meant we have met lenders covenants and the board expects to remain compliant in the foreseeable future. Cashflows Cash inflows and outflows during the year are shown in the cash flow statement (page 21). At the year end, the Group s current assets included 4.4m (: 1.8m) in liquid funds (cash at bank including overnight money market). 14

18 OPERATING AND FINANCIAL REVIEW continued Future developments As expressed in our Corporate Objectives, we will continue to re-invest in our existing property, based upon an asset management strategy. We will also continue to develop the housing stock to further meet housing need in our areas of operation. During the next twelve months further planned borrowings to finance new developments could increase gearing. However, this is in line with targets set by the Board. Undrawn loan facilities of 65.9m are available under existing arrangements. We anticipate that a significant amount of the facility will be drawn down over the next three years to fund our development programme. The association continues to assess the impact of government policy on its business plan and intended future developments. The Group s resources are only committed to a scheme once funding has been secured. Other initiatives will be developed over the next year to assist our tenants in dealing with changes to housing and other benefits. Statement of compliance In preparing this Operating and Financial Review, the Board has followed the principles set out in the SORP Dave Ashmore Chief Executive 17 July 15

19 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF GREENSQUARE GROUP LIMITED We have audited the financial statements of GreenSquare Group Limited for the year ended 31 March which comprise the group income and expenditure account, the association income and expenditure account, the statement of total recognised surpluses and deficits, the note of historical cost surpluses and deficits, the reconciliation of movement in funds, the group balance sheet, the association balance sheet, the group cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the housing association s members, as a body, in accordance with regulations made under Section 4 of the Friendly and Industrial and Provident Societies Act Our audit work has been undertaken so that we might state to the housing 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 housing association and the housing association s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the board and auditors As explained more fully in the Statement of the Responsibilities of the Management Board for the Report and Financial Statements (set out on page 6), 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 (APB's) Ethical Standards for Auditors. Scope A description of the scope of an audit of financial statements is provided on the APB's website at Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the group's and association's affairs as at 31 March and of the group's and association's income and expenditure for the year then ended; have been properly prepared in accordance with the requirements of the Industrial and Provident Societies Acts 1965 to 2002, the Housing and Regeneration Act 2008 and the Accounting Requirements for Registered Social Landlords General Determination Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts 1965 to 2002 require us to report if, in our opinion: a satisfactory system of control over transactions has not been maintained; or the association has not kept proper accounting records; or the financial statements are not in agreement with the books of account; or we have not received all the information and explanations we need for our audit. Grant Thornton UK LLP Chartered Accountants and Registered Auditors, London 17 July 16

20 GROUP INCOME AND EXPENDITURE ACCOUNT for the year ended 31 March Note Restated* Turnover: continuing activities 3 46,399 44,975 : acquired operations 3 2,117 - Total turnover 48,516 44,975 Operating costs 3 (37,191) (35,010) Operating surplus: continuing activities 3,7 11,215 9,965 : acquired operations Total operating surplus 11,325 9,965 Surplus on fixed assets Interest receivable and other income Interest payable and similar charges 10 (9,428) (8,969) Other finance charges 11 (121) (304) Surplus on ordinary activities before taxation 2, Tax on surplus on ordinary activities 13 (284) (87) Surplus for the financial year 26 1, *The comparatives for the year-ended 31 March have been restated as the group has introduced component accounting in accordance with the Statement of Recommended Practice (SORP) Accounting by Registered Social Housing Providers Update Further detail can be found in note 33 to these financial statements ASSOCIATION INCOME AND EXPENDITURE ACCOUNT for the year ended 31 March Note Turnover: continuing activities 3 5,710 5,285 Operating costs 3 (5,710) (5,285) Operating surplus: continuing activities - - Interest receivable and other income - - Gift aid received 79 - Surplus on ordinary activities before taxation 79 - Tax on surplus on ordinary activities - - Surplus on ordinary activities before taxation 79 - The notes on pages 22 to 55 form part of these financial statements. 17

21 STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS for the year ended 31 March Group Restated Association Surplus for the financial year 1, Unrealised surplus/(deficit) on revaluation of housing properties 13,755 (42) - - Unrealised deficit on revaluation of investments - (3) - - Actuarial (deficit)/gain relating to the pension scheme (1,413) 5, Total recognised surpluses and deficits relating to the year 14,185 6, Prior year adjustment (note 33) (4,615) - Total recognised surpluses since the last report 9, NOTE OF HISTORICAL COST SURPLUSES AND DEFICITS for the year ended 31 March Group Association Restated 2, Reported surplus on ordinary activities before taxation Realisation of property revaluation gains Excess of actual depreciation charge over historical cost depreciation 1,174 1, Historical cost surplus on ordinary activities before taxation 3,387 2, Historical cost retained surplus 3,103 2, RECONCILIATION OF MOVEMENTS IN FUNDS for the year ended 31 March Note Group Restated Association Opening total funds as previously stated at 1 April 140,392 - Prior year adjustment 33 (4,615) - Opening total funds as restated at 1 April 135,777 - Total recognised surpluses and deficits for the year 14, Closing total funds 149, The notes on pages 22 to 55 form part of these financial statements. 18

22 GROUP BALANCE SHEET at 31 March Note Restated '000 Intangible fixed assets Goodwill Tangible fixed assets Housing properties , ,640 Other tangible fixed assets 15 5,714 5, , ,371 Current assets Stock 17 2,275 1,445 Debtors 18 6,868 2,858 Asset held for resale Investments 19 3,576 1,397 Cash at bank and in hand 4,430 1,787 17,680 7,487 Creditors: amounts falling due within one year 20 (14,413) (11,656) Net current assets/(liabilities) 3,267 (4,169) Total assets less current liabilities 393, ,202 Creditors: amounts falling due after more than one year , ,300 Provisions for liabilities Net pension liability 11 6,381 4, , ,425 Capital and reserves Non-equity share capital Designated reserve Revaluation reserve , ,226 Revenue reserve 26 34,111 32,505 Consolidated funds 149, , , ,202 The financial statements were approved by the Board on 17 July and signed on its behalf by: H Gardner W Hall M Arnold Chairman of the Board Vice Chair Company Secretary The notes on pages 22 to 55 form part of these financial statements. 19

23 ASSOCIATION BALANCE SHEET at 31 March Note '000 '000 Tangible fixed assets Other tangible fixed assets Investments in subsidiaries Current assets Debtors Cash at bank and in hand 140-1, Creditors: amounts falling due within one year 20 (1,527) (1,327) Net current liabilities (511) (494) Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities Capital and reserves Non-equity share capital Revenue reserve Association s funds The financial statements were approved by the Board on 17 July and signed on its behalf by: H Gardner W Hall M Arnold Chairman of the Board Vice Chair Company Secretary The notes on pages 22 to 55 form part of these financial statements. 20

24 GROUP CASH FLOW STATEMENT for the year ended 31 March Note Restated Net cash inflow from operating activities 28 20,107 20,269 Returns on investments and servicing of finance Interest received and similar income Interest paid (10,649) (9,966) Net cash outflow from returns on investment and servicing of finance (10,632) (9,933) Taxation corporation tax paid (61) (18) Capital expenditure Purchase and construction of housing properties (39,067) (27,561) Social housing grant received 9,294 13,006 Purchase of other fixed assets (704) (706) Sale of properties - proceeds Proceeds from sale of investments Net cash outflow from investing activities (29,494) (14,664) Acquisitions Purchase of subsidiary undertaking (1,375) - Acquisition costs (98) - Cash at bank and in hand acquired (922) - Net cash outflow before liquid resources and financing (21,002) (4,346) Management of liquid resources Cash (invested in)/withdrawn from deposits 30 (2,179) 3,181 Financing Loans received 26,600 2,000 Loans repaid (776) (768) 30 25,824 1,232 Increase in cash 29,30 2, In the period since acquisition GW Sparrow & Company Ltd has contributed a net cash inflow of 86,

25 31 March 1. Legal status The Association is registered under the Industrial and Provident Societies Act 1965 and is a registered housing provider. 2. Accounting policies ` Basis of accounting The financial statements of the Group and Association are prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice: Accounting by Registered Social Landlords Providers Update 2010 and comply with the Accounting Requirements for registered social landlords General Determination The Board is satisfied that the current accounting policies are the most appropriate for the Association. Change of accounting policy The Group and Association has changed its accounting policy for how it depreciates its social housing properites. It is now required to identify separate components of each property and depreciate them over their estimated usual economic lives. Further details of the accounting policy are detailed below. The impact of this change in accounting treatment has been to reduce the Group s operating and post tax surplus by 1,137,000 (: 1,398,000). Basis of consolidation The Group accounts consolidate the accounts of the association and its subsidiaries at 31 March using the merger accounting principles set out in Financial Reporting Standard 6, and in the case of the acquisition of GW Sparrow & Company Ltd, acquisition accounting as set out in Financial Reporting Standard 2. Turnover Turnover compromises rental income receivable in the year, income from shared ownership first tranche sales, sales of properties built for sale and other services included at the invoiced value (excluding VAT) of goods and services supplied in the year and revenue grants receivable in the year. Revenue recognition Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting. Income from first tranche sales and sales of properties built for sale is recognised at the point of legal completion of the sale. Revenue grants are receivable when the conditions for receipt of agreed grant funding have been met. Charges for support services funded under Supporting People are recognised as they fall due under the contractual arrangements with administering authorities. Interest payable Interest is capitalised on borrowings to finance developments to the extent that it accrues in respect of the period of development if it represents either: a) interest on borrowings specifically financing the development programme after deduction of interest on social housing grant (SHG) in advance; or b) interest on borrowings of the Group as a whole after deduction of interest on SHG in advance to the extent that they can be deemed to be financing the development programme. Other interest payable is charged to the income and expenditure account in the year. Taxation The Association is accepted as a charity by the Inland Revenue. Income and capital gains of the Association are generally exempt from tax if applied for charitable purposes. 22