asra Housing Group Limited

Transcription

1 asra Housing Group Limited Financial Statements for the year ended 31 March

2 Contents Board and Directors Board and Directors 3 Chairman s Statement 4 Report of the Board of Management including value for money assessment 5 Statement of the Board s responsibilities in respect of the 9 Board Report and the financial statements Strategic report 10 Independent Auditor s Report 19 Consolidated Statement of Comprehensive Income 21 Consolidated Statement of Financial Position 22 Statement of Changes in Reserves 23 Consolidated Statement of Cash Flows 24 Members of the Board Group Chairman Other Members Group Chief Executive Aman Dalvi OBE Matt Cooney (Co-optee) Stephen Duck Resigned 31 May Jaffer Kapasi OBE Ponniah Rasanesan Anne Turner Wayne Morris Appointed 1 April Steve Amos Aniekan Umoren Appointed 1 April Chris Cheshire Appointed 1 May Katherine Lyons Appointed 1 May Matt Cooney Notes to the Financial Statements 25 Group Company Secretary Martin Lewis Resigned 31 March Matt Cooney Appointed 1 April Registered Office 3 Bede Island Road Leicester LE2 7EA Auditors Solicitors KPMG LLP One Snowhill Snowhill Queensway Birmingham B4 6GH Devonshires 30 Finsbury Circus London EC2M 7DT 2 asra housing Financial Statements 3

3 Asra Housing Group s Operating and Financial Review Visram House in Park Royal, London Chairman s statement Over the last year the housing sector has seen some of the most fundamental changes to housing policy. The Government s announcement of a four year 1% rent reduction, and lack of certainty thereafter has had a major impact on the investment plans of the housing sector. The Government has clearly signalled a preference that future investment should be to encourage home ownership. The result of the EU Referendum leads us to another level of uncertainty. Investment in much needed new homes is dependent on us raising new finance, and with focus now on home ownership, a stable or improving residential property market. Against this demanding policy and economic background, asra has made significant progress in reorganising services and reshaping our future. Our recently published corporate plan sets out an ambitious programme for the future, a future that builds on our heritage. Over the last year we have gained a more complete understanding of the long term value of each of our homes and developed strategies to leverage these for future investment and divest of those which have no long term social value as part of the asra portfolio. We have developed a revised operating model that builds efficiencies, modelling best performance in the private and public sectors. The model aims to resolve the vast majority of customer issues at the first point of contact. We already have an award winning contact centre and a robust technology platform, and we are making further investment to enable customers to more easily order repairs and make enquiries through our website. As a result of the 1% rent cut we have reduced our operating costs. In March, 80 colleagues left the business. The reshaping of resources to front line and first time fix has reduced our management costs by over 10%. Other savings have been achieved in major repairs and in the cost of re-letting properties. In March, the Homes and Communities Agency re-graded asra to G2/V2. This followed an agreed programme of work. This is the first step to restoring us to a G1 status. Despite the economic uncertainty, our business plan includes ambitious programme to develop new homes. We will be approaching existing lenders and the wider financial markets to raise new money to finance this plan. As part of this financing exercise we are evaluating whether we will amalgamate the two operating Registered Providers in the Group: Leicester Housing Association and Asra Housing Association. This year, the results of the Group are presented under International Financial Reporting Standards. Whilst there is some difference in terminology and presentation, the results are largely comparable with the results presented under UK standards. There are two major changes in how we measure results: (a) adjustments for the fair value of interest rate derivatives at 31st March was 78m (: 71m); (b) amortisation of social housing grant, for the year ended 31st March was 4.9m (: 4.6m). The year ended 31st March was a commercially and financially successful year and we have achieved a Group surplus of 11.9m compared with the deficit of 0.2m last year. The underlying operating surplus of the business, before property disposals, has improved by 0.8m ( property sales included our office in London). On behalf of the Board I would like to record my thanks to our stakeholders, contractors, suppliers and all of our staff who have supported the Group during this challenging year. We embark on the new financial year with a clear sense of purpose and programme of work to deliver our mission. Aman Dalvi, Group Chairman 21 July 4 asra housing Financial Statements 5

4 Asra Housing Group s Report of the Board of Management Principal Activities and review of business The Board presents their report of the Board of Management on the affairs of the Group, together with the financial statements and auditors report, for the year ended 31 March. The Group is a public benefit entity and comprises Asra Housing Group Limited (Association), and its subsidiary undertakings, which together form the Group. Asra Housing Group Limited is a non-asset holding, non-trading, non-charitable registered provider registered under the Industrial & Provident Societies Act 1965 and now governed by the Cooperative and Community Benefit Societies Act 2014 and is regulated by the Homes and Communities Agency. For 16 the operating subsidiaries were: - Leicester Housing Association (LHA) a charitable Registered Provider (RP) - Asra Housing Association Limited (ASRA) a charitable RP - Asra Construction Services Limited (ACSL) non-charitable The Group owns and manages approximately 14,000 homes across the Midlands, Greater London and the South East including the provision of care, support and housing to those with special needs. The Group operates four key business streams: housing for rent, primarily by families who are unable to rent at open market rates; supported housing and care for people who need additional housing-related support or additional care; low-cost home ownership, primarily shared ownership; and managed services for local housing co-operatives. Effects of material estimates and judgments upon performance In carrying out its responsibilities, the Board is required to assess whether suitable accounting policies have been adopted and to challenge the management judgments reflected in the results. The significant accounting issues where judgement or estimate are required were:- Estimated value of completed properties. The Board is required to ensure that the value of completed properties exceed the investment made in those properties, after taking into account grants received to support that investment. The value is the value of the future cash flows including rental income, management, maintenance and long term repair costs. These estimated cash flows are based on best available information including stock condition data and data provided to us by our valuer Savills plc. In some limited cases, mainly sheltered schemes and properties with common facilities, the cost after deducting grant exceeds the value. In these instances we have relied on estimated depreciated replacement cost of these assets, these costs based on data provided by a panel Employer s Agent. Recoverability of rent arrears. The accounts includes provision against recoverability of rent arrears. Rent collection performance is monitored by the Board and Executive Team through standard key performance indicators. Rent collection targets are annually assessed, and in recent years have been influenced by Government policy on welfare reform. Performance is benchmarked against other registered providers. The bad debt provision policy is reassessed each year based upon performance and benchmark data. Going concern. The Board bases its assessment of the Group and the individual group members on the latest business plan forecasts. These forecasts include assessment of compliance with loan covenants, profitability, liquidity, available property security. These are subject to sensitivity and scenario testing. 6 asra housing Financial Statements 7

5 asra Housing Group s Report of the Board of Management continued Effects of material estimates and judgments upon performance - continued Value of schemes in the course of development. Provision is made for the cost of work undertaken but not yet certified at the balance sheet date. Schemes or units that are developed for either private sale or part sale through shared ownership are included in current assets at the lower of cost of cost or net realisable value. The realisable value is based on latest market information. Qualifying third party indemnity provisions The group has no qualifying third party indemnity provisions in place for directors of Asra Housing Group Limited Registered Social Housing Provider. Value for Money asra has a well developed programme to ensure that we make the best use of our resources and continuously improve value for money. The Government s announcement that social housing rents would reduce by 1% per annum over four consecutive years sharpened this focus. During the year we have reorganised the way that we deliver our services, and implemented a new operating model. The cost base effective 1st April has been reduced by more than 10%. We have made use of benchmarking to inform our decisions, with focus being given to repairs, contact centre, and management costs. We have made significant progress on assessing the long term value of our properties and also as security for raising finance. We have calculated the returns on all of our assets and have developed a strategy to divest those assets where there is limited value to the Group. Our value for money self assessment sets out in detail the progress that we have made and the work that we will be doing in -17. In this next year our focus will be on embedding the new operating model, implementing a digital transformation project that will enable customers to access majority of services online and to progress our rationalisation of poorer performing stock. Our annual value for money self-assessment is published on our website at about-us/performance/value-for-money/. Compliance with Governance and Financial Viability Standard The Group has assessed its compliance with the Governance and Viability Standard issued by the Homes and Communities Agency and certifies it s compliance therewith. The Board must adhere to Community Benefit Society Rules; a set of standards determined by the Housing Regulator; and a recognised code of governance. The chosen code is the National Housing Federation Code of governance: Promoting board excellence for housing associations ( edition) which the Board is fully committed to, and complied therewith. The Governance and Remuneration Committee receives a report on its compliance with the Homes and Communities Agency (HCA), Governance and Financial Viability Standard. The Group was compliant with the standards at 31st March. On 1st April, the Group was assessed by the HCA as G3/V2 grading. The Governance grading of G3 is deemed to be non compliant with the requirements of the Standards. In March, the HCA re-graded asra as G2/V2, a compliant grading. This followed completion of a work programme to give the HCA the assurances required to satisfy the observations set out in the Regulatory Judgement of April. During the year the Group has implemented a comprehensive asset and liability register. The work has been reviewed by Savills plc who have certified that in their opinion the register is compliant with the requirement of the Standards and Code of Practice. 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 a well developed business plan and risk management strategy. The Board has assessed the plans based on latest available information, and whilst noting the risks and uncertainties in the current environment, that Asra Housing Group Limited has adequate resources to continue its operations for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing accounts. Post balance sheet events There are no adjusting post balance sheet events. Assessment of the effectiveness of internal control The Group Board has overall responsibility for establishing and maintaining the system of internal control. As with all systems of internal control, it is designed to manage rather than eliminate all risk of failure to achieve business objectives and can therefore provide reasonable and not absolute assurance against material misstatement or loss. The system of internal control is subject to continuing review and development. The Group Board delegates responsibility for the annual review of the effectiveness of the system of internal control to the Risk & Audit Committee. The Committee met five times during the course of the year. Assurance over the control environment was obtained from the following main sources: (a) Risk management framework (b) Internal audit service (c) Financial and performance monitoring and management systems (d) Senior management certification of controls (e) Policy framework covering all major aspects of the operation of the business (f) Human Resource policies and performance management system The Risk and Audit Committee formally reviews the system of internal controls on an annual basis. The Committee is mandated to have oversight of the system and considers internal controls at each meeting. The formal review comprises of: (a) Annual report of the Group Internal Auditor. (b) Analysis of the senior management assessment of internal control, measured against actual performance and the Group s risk register. (c) Statement of review of internal controls by the Executive Team and presented to the Committee by the Group Chief Executive. The Risk and Audit Committee document their review in an annual report which is presented to the Group Board. Conclusion The Group Board, through the Risk and Audit Committee, has reviewed the effectiveness of the Group s risk management, internal control and governance processes throughout the year ended 31 March and up to the date of approval of the annual report and accounts. The Group Board confirms that no significant weaknesses in internal controls have been identified up to the date of signing the annual report and accounts that would result in material losses, contingencies or uncertainties, and require disclosure in the financial statements. 8 asra housing Financial Statements 9

6 Asra Housing Group s Report of the Board of Management continued Board member s responsibilities The Board is responsible for preparing the Board and Strategic Reports and the financial statements in accordance with applicable law and regulations. Co-operative and Community Benefit Society law requires the Board to prepare financial statements for each financial year. Under those regulations the Board have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the association and of the income and expenditure of the group and the association for that period. In preparing these financial statements, the Board is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; Disclosure of information to Auditors The Directors who held office at the date of approval of this statement confirm, so far as they are each aware, there is no relevant audit information of which the Group s independent auditors are unaware; and each Director has taken all the steps he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Group s independent auditors are aware of that information. Approved by the board and signed on its behalf by: Anne Turner Board Member 21 July state whether applicable UK Accounting Standards and the Statement of Recommended Practice 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 association will continue in business. The Board is responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the association and enable them to ensure that its financial statements comply with the Cooperative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing. The Board has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the association and to prevent and detect fraud and other irregularities. The Board is responsible for the maintenance and integrity of the corporate and financial information included on the association s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 10 asra housing Financial Statements 11

7 asra Asra Housing Group s Report Strategic of Report the Board of Management continued Board member s responsibilities The Board present their strategic report on the affairs of the Group, together with the financial statements and auditors report, for the year ended 31 March. The Board is responsible for preparing the Board and Strategic Reports and the financial statements in accordance with applicable law and regulations. The Directors who held office at the date of approval of Objectives and strategy for achieving this The statement original Asra confirm, Housing so Association far as they are began each as aware, a Black Co-operative and Community Benefit Society law requires there and Minority is relevant Ethnic audit ( BME ) information housing provider of which in the 1984 Group s the those Board objectives to prepare financial statements for each independent and its initial remit auditors was are to provide unaware; homes and each and Director services financial year. Under those regulations the Board have has for Asian taken older all the people. steps he/she Many of ought the original to have BME taken housing as a elected In to prepare we consulted the financial extensively statements with stakeholders in accordance Director associations to make no longer himself/herself exist as independent aware of any organisations relevant with about UK their Accounting perceptions Standards. of asra and, as a result, we set the audit and with information approx. 14,000 and to homes, establish asra that is the Group s largest following purpose and values: independent remaining BME auditors housing are association aware of that in the information. UK. The financial statements are required by law to give a true and Our fair purpose view of the - providing state of affairs homes, Today asra is a prominent provider of housing of the Group and the Approved by the board and signed on its behalf by: association and of not the just income places and to expenditure live. services to multicultural communities. of the group Our values and the association - See it from for that the customer s period. perspective In preparing these - Serving financial diverse statements, communities the Board is required to: on their doorstep select suitable accounting - Team asra policies and then apply them consistently; ( one team, individually responsible) Anne Turner Our make vision judgements - Achieve and estimates a reputation that for are delivering reasonable and prudent; great homes and great services. Board Member state whether applicable UK Accounting Standards and 21 July the Statement of Recommended Practice 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 association will continue in business. The Board is responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the association and enable them to ensure that its financial statements comply with the Cooperative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing. The Board has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the association and to prevent and detect fraud and other irregularities. The Board is responsible for the maintenance and integrity of the corporate and financial information included on the association s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclosure of information to Auditors 12 asra housing Financial Statements 13

8 Asra Housing Group s Strategic Report Business Model Asra Housing Group Limited is a parent company Registered Provider with no assets or liabilities. The two principal operating subsidiaries, Leicester Housing Association and Asra Housing Association are both Registered Providers. All three Registered Providers have charitable objectives. Together these Companies provide homes and services principally across the East Midlands and Greater London. Each of the operating subsidiaries have their own loan facilities secured on assets owned by those companies. New homes are developed with the support of capital grants from either the Greater London Authority or the Homes and Communities Agency. In some cases, new developments are supported by grants from local authorities through their own Right to Buy receipts. Developments may be financed through discounted priced developments as a result of Section 106 agreements. The focus of the Group s services is the delivery of affordable housing products including social, affordable and intermediate rent and shared ownership. The Group has limited involvement in direct care and support schemes, market rent and bespoke financing/ contracting schemes. The scope of activity has been narrowed in recent years to focus on core housing products. The Group does develop homes for sale, but only as part of wider affordable housing developments. Services to customers are largely administered from the Head Office in Leicester, with local teams located in London and Northampton. Our revised operating model encourages contact online or alternatively through the centralised contact centre. The aim is to achieve resolution to 95% of all enquiries at the first point of contact. Day to day repairs are booked through the contact centre and delivered by outsourced contractors in the East Midlands and London. In the Northamptonshire area maintenance services are provided by Asra Property Services. Planned maintenance of homes, including major component replacement, is delivered by outsourced contractors. We aim to publicise major component replacement programmes at least two years in advance of the works being undertaken. The Group is governed by a common Board that covers all of the Registered Providers in the Group. The only other operating company, Asra Construction Services Limited (ACSL) is a company limited by shares which manages the construction contracts on behalf of Asra Housing Association Limited and Leicester Housing Association Limited. The Directors of ACSL are two Executive Directors of the Group. The Board has published a corporate plan setting out the unique asra business recipe and corporate objectives and targets. This is available at The Corporate Plan sets out our vision with delivery linked to four priority areas: 14 asra housing Financial Statements 15

9 Achieving our vision We have taken a strategic approach to achieving our new vision which is building a reputation for delivering great homes and great services. Successful delivery of our vision and what is stands for is linked to four priority areas, which align with our core purpose and values. Situation Today start of Core purpose Providing homes, not just places to live Achieving our VISION A reputation for delivering great homes and great services. Operational performance substantially improved Serving customers well Achieve & sustain a 95% FTF Achieve & sustain 90% customer satisfaction Achieve & sustain 90% satisfaction with repairs Shift 30% of call traffic on-line Deliver Chat as a new customer channel Offer video appointment slots to customers Improve the 3 R s Improved operating model that delivers higher quality at lower cost High quality customer experience Asset management approach improved Helping those squeezed out of housing market Consider exiting from remaining non-core services Consider offering enhanced RTB discount for homes that don t meet financial targets Offer tenants conversion to Shared Ownership Extend property shop to sales and London market Recognised by customers & regulator for high standards Customer satisfaction is good, but - need to modernise & improve customer experience Managing our business well Empowered employees Need to change operating model and make savings to absorb 4-year 1% rent reduction Achieve and sustain 3m salary savings Deliver the new operating model and embed the Business Recipe Implement welfare reform plan Review service charges Dispose of underperforming homes and homes outside our core areas Consider consolidating the Group into single entity Great place to work & build a career Need to develop a clear business recipe to guide future development of our business Working in partnership Deliver the One Woolwich programme Engage with local authorities about our plans to replace RTB properties Recognised by customers & regulator for high standards Our Values See it from customer s perspective, Serving diverse communities, Team asra. 16 asra housing Financial Statements 17

10 asra Housing Group s Strategic Report continued Future prospects Like all other Registered Providers, asra s prospects are influenced by changes in UK Government policy on housing and by changes in the regulatory requirements of the Homes and Communities Agency. In July, the UK Government legislated to reduce social housing rents by 1% per annum for a period of four years, impacting on the profitability and value of rented homes. The Government reached agreement with the National Housing Federation to introduce a voluntary right to buy programme, with discounts available to existing eligible customers being funded by local authority sale of high value properties. The Government s policy is aimed at increasing home ownership whilst limiting the development of affordable new rented homes. The Government issued planning practice guidance that outlines how s106 agreements should prioritise investment in starter homes. This will influence how developers will make units available for rented and other shared ownership products. The Homes and Communities Agency Shared Ownership and Affordable Homes Programme to 2021 announced 4.7bn of grant to help people to buy their own home mainly through shared ownership products. The election of a new Mayor of London delayed the announcements of the Greater London Authority programme but it is anticipated that the focus will also be shared ownership. In March, asra regulatory grading was upgraded to the governance grading G2 and viability grading maintained at V2. This was an important step to raising further finance to expand our development programme. The result of the European Union (EU) referendum has created further uncertainty in the short to medium term, including availability of finance, inflation and interest rates and sales values. We are a strong and resilient business operating in an increasingly volatile political and economic environment. Our corporate plan sets out how we will deliver on our ambition to help people who are squeezed out of the housing market. We have a rich heritage in supporting communities. We are proud of our BME heritage. We have a track record of delivering ambitious programmes to build new homes and develop customer services. Our decisions are made based on the twin components of social purpose and value for money. Our business and financial plans include a significant programme of home building, investment in existing homes, rationalisation of non performing housing assets and operational efficiencies. To build new homes we plan to raise new finance and to evaluate the option of amalgamating the Registered Provider entities into a single legal entity. This would improve operational performance and enable us to make better use of our assets as property security. Like many Registered Providers we remain open to the opportunity of working collaboratively and more closely with other like-minded Registered Providers. Our operational, business and financial plans are stress tested under a wide range of circumstances. Regardless of the economic, financial and political fallout following the EU Referendum, asra remains a vibrant and successful business. Principal risks and uncertainties asra s risk and governance model is designed so to ensure that the Board maintains overall responsibility for risk. Each Director and Head of Service is responsible for identifying, reporting and managing risks. Board and the Executive Team review the strategic risks at each of its Board meetings. The Board has a process of horizon scanning, evaluating both the internal and external environment, to ensure that both risk appetite and strategic risks are actively managed. The Board has an agreed appetite statement and the Group takes and manages risk to conform with that appetite statement. asra s external risk is heavily influenced by economic, regulatory and political influences. Internal risk is driven by our objectives, our change programme and ensuring that our services and homes meet legislation and regulation. Table 1: The following are the key risks: Principal risk Internal and external influences on viability of business plans Achieving target for sales of homes developed for sale and initial sale of equity. Treasury risk including liquidity, managing mark to market, and interest rate exposures Regulation and managing regulatory grades Asset management delivering a cost effective repairs service, managing the planned programme and disposing of unviable homes. Welfare reform and impact on customers and asra Housing Group. Managing the change in operating model and digital transformation programme Contractor insolvency and performance leading to delays in delivering new homes and increased costs Main mitigation 1. Business plan- regular reviews based on latest available evidence 2. Treasury strategy to support planning 3. Valuation of all property assets 4. Stress testing of the business plan. 1. Limiting sales exposure to Board agreed policy limits. 2. Sensitivity testing of alternative outcomes 1. Treasury strategy covering liquidity and interest rate exposures 2. Regular in depth reporting to Investment Committee and Board 3. Specialist advice and support through treasury advisers. 1. Review by Board and Governance and Remuneration subcommittee. 1. Stock condition survey for 90% of stock undertaken by specialist contractor and validated 2. Return on asset reporting and modelling of viable assets 3. Programme of planned repairs 4. Asset disposal strategy 1. Partnerships with others to publicise welfare reform 2. Early intervention in arrears cases, providing support to help customers to sustain tenancy 1. Board oversight of programme 2. Specialist project managers 3. Strategic partnerships with specialist providers 1. Close monitoring of progress on schemes and monitoring by Investment Committee 2. Pre-qualification criteria for contractors and developer partners. Key performance measure or similar 1. Financial targets including key financial covenant measures 2. Cash flow and investment forecasting 1. Sales targets 1. Cash flow forecasts 2. Treasury and property security forecasts 1. Action plan reports to Governance & Remuneration Committee 1. Management accounts 2. Key performance measures 1. Key performance measures, in particular rent collection and arrears. 1. Customer satisfaction 2. Rent collection and arrears 1. Reporting to Investment Committee How risk has changed in the reporting period The Government rent reduction has negatively impacted viability and the capacity to develop new homes. Gov t housing policy favours home ownership, and introduction of Right to Buy supports new investment. Implementation of RTB has been delayed. The EU Referendum has created additional volatility in housing and financial markets. Increased exposure to mark to market as a result of volatility in financial markets. Exposure to margin calls covered with increased property security, implementation of a 50bps security buffer. Regulatory upgrade in March from G3/V2 to G2/V2. This followed completion of a comprehensive action plan. We completed an in depth review of governance undertaken by external consultants. In -16 completed comprehensive stock condition data and resulting financial modelling. Specialist components have been subject to a separate condition survey. Rollout of universal credit Implemented new model effective April, for the year under review the preexisting model applied. Build prices have increased, particularly in London. Contractors are experiencing shortage of skilled labour and increasing costs. Two Asra schemes have been delayed. The Board has separately reviewed the financial risks including credit risk, cash flow risk, and asset risk. 18 asra housing Financial Statements 19

11 Asra Housing Group s Strategic Report continued Credit risk The Group s principal financial assets are bank balances and cash, rent arrears and other receivables, and investments in money market funds. The credit risk on liquid funds, funds placed to secure marked to market derivative positions and performance under derivative financial instruments is limited because the counterparties are banks with acceptable creditratings assigned by international credit-rating agencies. Surplus cash placed on deposit is subject to the policy approved by the Board, the objective of the policy is to limit exposure either through the credit quality of the counterparty or through concentration of cash in any one institution. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and tenants. Cash flow risk The principal cash flow risks are set out in the strategic risks above. The principal cash flow risks include rent collection, management costs, maintenance and long term repair costs, development and construction costs, sales of equity in homes and interest rate risk. The Group has a robust asset management strategy agreed by the Board to support investment in existing homes. The Group s loan portfolio exposes it primarily to cash flow risk as a result of changes in interest rates. The Group uses interest rate swap contracts on either an embedded or stand-alone basis. Stand alone derivatives expose the Group to the cash flow risk of margin calls. Interest rate risk is managed in accordance with the Group s treasury strategy. As at March, 78.57% of the loan portfolio was hedged against adverse movement in interest rates, with an average unexpired term of the portfolio being 23 years. The Group manages cash flow risk through having in place loan facilities to support investment and provide a liquidity buffer for any reasonable adverse scenarios. As at March the Group had 36m of unutilised loan facilities, fully secured and available to be drawn down on 48-hour notice. During -17 the Group will be approaching the market to increase available facilities. Asset risk The 1% rent reduction, Right to Buy and volatility in fair value of interest rate derivative transactions has introduced a new class of financial risk. The value of property unsecured and available for charge at 31st March was 140m. The Board monitors compliance with existing asset cover ratios required by lenders, and ensures that there is sufficient headroom to cover marked to market positions, secure further borrowings and to protect the Group when rationalising housing assets. Review of business performance financial and non-financial performance The Board ensures that the Group delivers the vision and objectives of the four priorities through a combination of financial and non-financial performance measures. The targets for are set out in the Corporate Plan. The Board receives regular performance information in the form of management reports, management accounts and key performance measures. Table 2: Performance Priority area Measure Actual /16 Serving customers well Helping people squeezed out of the housing market Managing our business well Working in partnership with others The financial results for year ended March are reported for the first time under International Financial Reporting Standards, in accordance with the Housing Statement of Recommended Practice 2014 for Registered Social Housing Providers. The results for the prior year have been restated to provide comparison. The surplus for the year, after tax, was 11.9m ( restated (0.2m)). The results for the year include the principal adjustments required under IFRS, being amortisation of Social Housing Grant increasing income by 4.9m (: 4.6m) and adjustments required through accounting for the fair value of interest rate hedging transactions of 6.7m (: 34.5m). Target /16 Looking forward: target for /17 Customer satisfaction improved to 86% 90% 85% Satisfaction with complaint resolution 91% 91% 92% Satisfaction with repairs 91% 90% 90% Anti-social behaviour cases closed within 60 days 74% 80% 55% % homes thermal efficient 97.3% 97.5% 96.5% First time fix for customer queries 93.5% No target 95% Building new homes RTB receipts reinvested in new homes N/A N/A 0% Converting tenants to shared owners N/A N/A 50% Rents net collection rate 101% 100% 101% Rent arrears as % of debit 3.3% 4.0% 4% Relets - % of empty homes 0.73% 1.5% 0.4% Relets average relet time (days) Repairs routine completed on time 97.9% 97.0% 97.2% Repairs appointments kept as % of 95.0% 90.0% 95.0% appointments made Health & Safety - % gas certificates in 99.92% 100% 100% place Operating margin 32% UK GAAP: 33% 36% Surplus on group turnover 13% UK GAAP: 8m 11% Procurement savings 683k 250k 250k Deliver new homes in partnership with Lovell Homes : One Woolwich Phase 1: 133 homes Phase 2: 52 homes Over three year period 20 asra housing Financial Statements 21

12 Asra Housing Group s Strategic Report continued Review of business performance financial and non-financial performance The Board has reviewed the performance and whilst generally there has been outperformance against targets, there is no room for complacency. In -17 we envisage a more demanding operating environment. During the year we have delivered against an ambitious work programme. The majority of the programme has met targets with successful outcomes against business priorities. The main events are: In -16 we completed 208 new homes, 113 in the East Midlands and 95 in London. Of the total completed 136 were for affordable rent and 72 were for shared ownership at a cost of 38m and benefiting from grant of 5m. Schemes completed included Robin Hood Chase, in St Ann s, Nottingham, comprising of 45 purpose built flats for those over 55 or living with a disability; and Rectory Fields Crescent, in Charlton, Royal Borough of Greenwich, which provided 10 homes for affordable rent and 20 for shared ownership. Our development expertise is backed up by strong sales performance, with the 15 shared ownership homes in phase 1 of Tavern Keys, Southwark, being sold before the scheme was handed over by the developers. Sales times for our homes are always within three months of completion. We work in partnership with organisations to deliver new homes. In -16 we delivered the St Nicholas Church development, in partnership with the Diocese of London and Perivale Parish Church Council. The partnership delivered 7 houses and 10 apartments for shared ownership and affordable rent and a new church hall and vicarage for the congregation, which was awarded a BREEAM Excellent environmental assessment rating. During the year we embarked to a programme to reorganise the way that services are delivered. The focus is to resolve the majority of customer issues at the first point of contact. In the initial stage this will place greater emphasis on contact by phone, and the issue being resolved by the contact centre. This medium term strategy is to divert customers online so that they can make online payment, account enquiry, order repairs and report community, estate or neighbourhood issues. This change has resulted in traditional generalist housing teams being replaced by specialists that will provide the infrastructure and process, and also deal with the more complex issues. As part of this change we have concentrated all property related matters into a single team with responsibility for major repairs, planned maintenance programmes, day to day repairs and our own in-house repairs service. During the year we have obtained a more complete understanding of the long term repair and investment requirement of all of our homes. We have also surveyed all of our specialist equipment and given greater focus to investment compliance. During the year we spent 20.6m on repairing our properties, and our business plan includes similar level of investment into the foreseeable future. This year we have published our forward three-year investment programme. Governance The Group is governed by a common board comprising eight Non-Executive Directors, who are members of both LHA and AHA as well as the parent Board, and the Chief Executive. Each Director is selected for the skills and knowledge they offer relative to the strategic priorities of the Group. The Board also delegates authority to four specialist committees, Risk & Audit, Governance & Remuneration, Customer Services and Investment. Roles, responsibilities and accountabilities are established in Standing Orders, a document owned by the board. The Group certifies compliance with the Governance and Financial Viability Standard issued by the HCA. Table 3 shows the attendance record of the Board and Committee members at Board and Committee meetings during the year. Table 3: Board Member Attendance Name Board Risk & Audit Committee Investment Committee Customer Service Committee Governance & Remuneration Committee Board Members: Aman Dalvi 6 of 7 Stephen Duck 7 of 7 5 of 5 5 of 5 Jaffer Kapasi 6 of 7 4 of 4 1 of 1 Ponniah Rasanesan 6 of 7 5 of 5 5 of 5 Anne Turner 6 of 7 1 of 1 3 of 5 Steve Amos 6 of 7 5 of 5 5 of 5 Wayne Morris 6 of 7 2 of 4 5 of 5 Aniekan Umoren 4 of 7 2 of 4 0 of 1 Committee members: Paul Periton 4 of 5 Matt Cooney 7 of 7 5 of 5 5 of 5 William Cornall 5 of 5 Non-executive members received the following remuneration for the year: Table 4: Board Member Remuneration Board members received the following pay in: -16 Remuneration (including pension contributions) Expenses reimbursement Aman Dalvi 21,098 20, Sally Jacobson - 5, Stephen Duck 11,014 11,189 1,194 1,290 Shaama Saggar-Malik - 4, Jaffer Kapasi 11,332 8, Ponniah Rasanesan 10,906 11, Anne Turner 9, Steve Amos 9, Aniekan Umoren 8, Wayne Morris 11, TOTAL 92,884 61,853 4,212 2, asra housing Financial Statements 23

13 Independent auditor s report to the members of Asra Housing Group Limited With effect from 1 April Board members have received the following remuneration: 20,890 per Group Chairman, 13,995 per Deputy (vacant), 11,332 per Chair of Committees and 8,774 per ordinary member per annum. (2014: 20,440 per Group Chairman, 13,694 per Deputy, 11,088 per Chair of Committees and 8,586 per ordinary member per annum.) Only Group Board non-executive Directors receive remuneration. Approval Approved by the board and signed on its behalf by: Anne Turner Board Member 21 July We have audited the financial statements of Asra Housing Group for the year ended 31 March set out on pages 21 to 64. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This report is made solely to the association in accordance with section 87 of the Co-operative and Community Benefit Societies Act 2014 and section 128 of the Housing and Regeneration Act Our audit work has been undertaken so that we might state to the association those matters we are required to state to it in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the association as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Board and auditor As more fully explained in the Statement of Board s Responsibilities set out on page 9, the association s Board is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council s website at auditscopeukprivate. Opinion on financial statements In our opinion the financial statements: give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the group and the association as at 31 March and of the income and expenditure of the group and the association for the year then ended; comply with the requirements of the Co-operative and Community Benefit Societies Act 2014; and have been properly prepared in accordance with the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing. 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 association has not kept proper books of account; or the association has not maintained a satisfactory system of control over transactions; or the financial statements are not in agreement with the association s books of account; or we have not received all the information and explanations we need for our audit. Harry Mears for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants One Snowhill Snow Hill Queensway Birmingham B4 6GH 24 asra housing Financial Statements 25

14 Consolidated Statement of Comprehensive Income for the year ended 31 March Consolidated Statement of Financial Position as at 31 March Note Restated Turnover 2 90,187 83,759 Less: Operating Expenditure 2 (59,730) (56,130) Less: Operating costs pension deficit (3,654) - Gain on disposal of property, plant and equipment 7 2,019 10,264 Operating Surplus 2 28,822 37,893 Interest receivable Interest and financing costs 10 (18,626) (17,113) Movement in fair value of financial instruments 23 1,294 (20,037) Movement in fair value of investment properties (930) Surplus/(deficit) before tax 6 11,990 (21) Taxation 11 (96) (177) Surplus/(deficit) for the year 11,894 (198) Change in fair value of hedged financial instruments 23 (8,036) (14,484) Total comprehensive income (deficit) for the year 3,858 (14,682) The turnover and operating surplus for the current year all relate to continuing activities. Note Fixed Assets Intangible assets and goodwill 30 (14,591) (15,502) Tangible fixed assets housing properties , ,862 Other tangible fixed assets 12 4,839 5,508 Investment properties 13 8,274 8,030 Investments , ,578 Current Assets Stock 15 13,376 11,957 Trade and other debtors 16 3,654 4,493 Investments 17 14,720 18,240 Cash and cash equivalents 30,692 46,497 62,442 81,187 Less: Creditors: amounts falling due within one year 18 (37,499) (30,914) Net current assets 24,943 50,273 Total assets less current liabilities 984, ,851 Creditors: amounts falling due after more than one year 19 (930,290) (936,833) Total net assets 53,876 50,018 Reserves Income and expenditure reserve 84,353 72,299 Called up share capital Cash Flow Hedge reserve 29 (30,752) (22,716) Revaluation reserve Restricted reserve ,876 50,018 The financial statements on pages 21 to 64 were approved by the Board on 21 July and signed on its behalf by: Aman Dalvi Anne Turner Matt Cooney Chairman Board Member Company Secretary 26 asra housing Financial Statements 27

15 Statement of Changes in Reserves as at 31 March Notes to the Financial Statements for the year ended 31 March Cash Flow Hedge reserve Consolidated Statement of Cash Flow for the year ended 31 March Revaluation reserve Restricted reserve Income and exp. reserve At 1 April - restated (22,716) ,299 50,018 Movement in the year (8,036) ,894 3,858 Transfer of restricted expenditure to income and expenditure reserve - - (160) Balance at 31 March (30,752) ,353 53,876 Total Note Net cash generated from operating activities 31 34,489 41,538 Cash flow from investing activities Tax paid 11 (176) (7) Purchase of tangible fixed assets (38,443) (64,653) Proceeds from sale of tangible fixed assets 8,849 17,005 Grants received 1,663 9,247 Grants repaid 25 (1,505) - Interest received Cash flow from financing activities Interest paid (20,634) (18,676) New secured loans - 57,000 Repayments of borrowings (3,824) (3,950) Withdrawal from deposits 3,520 (310) Net change in cash and cash equivalents (15,805) 37,361 Cash and cash equivalents at beginning of the year 46,497 9,136 Cash and cash equivalents at end of year 30,692 46,497 The accompanying notes form an integral part of the financial statements. 1 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 asra Housing Group is a public benefit entity, as defined in FRS 102 and applies the relevant paragraphs prefixed PBE in FRS 102. Details of the transition to FRS102 are shown in Note Accounting Convention The Financial statements are prepared under the historical cost convention. After making enquiries, reviewing budgets and forecasts and examining major areas which could give rise to significant financial exposure, the Directors are satisfied that no material or significant exposures exist other than as reflected in these financial statements and that Asra Housing Group Limited has adequate resources to continue its operations for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing accounts. 1.2 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 in the Group financial statements. The Group has a well developed business plan and risk management strategy. The Board has assessed the plans based on latest available information, and whilst noting the risks and uncertainties in the current environment, has concluded that the Group has sufficient resources to continue its operations for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing accounts. 1.3 Key estimates and Judgements The key estimates and judgements used in preparing these financial statements are the estimated value of completed properties, the recoverability of rent arrears, the impairment of housing properties, the fair value of investment properties, the value of schemes in the course of development, the fair value of financial instruments and the assumption of going concern. 1.4 Basis of consolidation The Group is required by the Co-operative and Community Benefit Societies Act 2014 to prepare group accounts. The Group accounts comprise those of Asra Housing Group Limited together with its subsidiaries, in accordance with the requirements of FRS102. The Association itself had no turnover, operating costs or other income or expenditure and had no assets or liabilities other than investment in subsidiaries. All notes are the consolidated Group position. 1.5 Turnover Turnover is net of voids and VAT and includes: Rents and service charges Residential charges Revenue grants Supporting People income receivable Management Fees Call Centre income Training Centre / Office rent Amortisation of social housing grant Charges for services provided and Supporting People income are recognised as income when asra has provided the service concerned. Grants made as contributions to revenue expenditure are credited to income in the period in which the related expenditure is incurred. Turnover has been analysed in accordance with the requirements of Homes and Communities Agency Regulatory Committee guidance Regulating a Diverse Sector (see note 2). 28 asra housing Financial Statements 29

16 1.6 Interest Payable Interest is capitalised on borrowing to finance developments to the extent that it accrues in respect of the period of development if it represents either: a) interest of borrowings specifically financing the development programme after deduction of interest on social housing grant in advance; or b) interest on borrowings of asra as a whole after deduction of interest on social housing grant 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 period. 1.7 Pensions The Group participates in the defined contribution schemes of the Social Housing Pension Scheme. The Group participated until 31 December 2013 in a pension scheme providing benefits based on career average pay. The assets of the scheme are held separately from those of the Group. The Group is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by paragraphs and 28.13A of FRS 102 accounts for the scheme as if it were a defined contributions scheme. A contractual agreement is in place between the Group and SHPS to fund the deficit. The liability for contributions payable that arise from the agreement (to the extent that they relate to the deficit) is recognised as a liability in the Statement of Financial Position in the year in which they become payable 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. Contributions payable to the Group stakeholder s pension scheme are charged to the income and expenditure account in the period to which they relate. 1.8 Taxation The charge for taxation is based on surpluses arising on certain activities which are liable to tax. The Group accounts for deferred tax in line with the requirements of FRS102. A deferred tax asset is only recognised on the basis of available evidence where it is more likely than not that there will be taxable profits in the future, against which a deferred tax asset will be offset. 1.9 VAT Certain members of the group are VAT registered but a large proportion of the income (rents), is exempt for VAT purposes and this therefore gives rise to partial exemption calculation. Expenditure is therefore shown inclusive of VAT and the input VAT recovered is included in turnover Supported Housing schemes In respect of supported housing schemes owned by the Group where the managing agents suffer the risks and have control of benefits, the income and expenditure and related current assets and liabilities are not included in the financial statements Housing properties and depreciation General Needs, Sheltered Housing and Shared Ownership properties are stated at cost less depreciation. Cost for housing properties includes the cost of acquiring land and building, construction costs including internal equipment and fittings, directly attributable development administration costs, cost of capital employed during the development period and expenditure incurred in respect of improvements and extension of existing properties to the extent that it enhances the economic benefit derived from the assets. Directly attributable development administration costs are the labour costs of the Group s own employees arising directly from the construction or acquisition of the property, and the incremental costs that would have been avoided, only if the property had not been constructed or acquired. Expenditure on repairs to properties and equipment arising through normal wear and tear is charged to the income and expenditure account in the year in which it occurs. Properties developed for outright sale Shared ownership properties are split between fixed and current assets, with the element relating to the expected first tranche sale being treated as a current asset along with completed properties for outright sale Current asset properties are stated at the lower of cost and net realisable value. Cost comprises materials, direct labour costs and other direct overheads. Net realisable value is based on the estimated sales price after allowing for all further costs of completion and disposal. Any surplus made on the sale of the first tranche is treated as turnover in the Statement of Comprehensive Income in accordance with the treatment proposed in the SORP Second and subsequent tranche surpluses or deficits are shown after operating surplus has been determined, but before interest. The Group separately identifies the major components which comprise its housing properties, and charges depreciation to write down the cost of each component to its estimated residual value, on a straight line basis, over its estimated useful economic life. The major components of its housing properties and their useful economic lives are as follows: Building structure Roofs Kitchens Bathrooms Windows and doors Heating and boilers Photo-voltaic Panels years - 50 years - 30 years - 40 years - 40 years - 15 years - 24 years Freehold land is not depreciated. Also, assets in the course of construction are not depreciated. Social housing grant and other capital grants are included in creditors and amortised in line with the life of the structure. Depreciation has been provided to write down the cost of housing buildings, less capital grants received, to their estimated residual value, over the useful economic life of the buildings in equal annual instalments. The useful economic life of a property has been deemed to commence at: the completion of major refurbishment work after purchase; or completion of building work for new build properties; or date of purchase if no major refurbishment works take place Impairment reviews are carried out annually where properties have an economic life in excess of 50 years, and provision made against the carrying value where appropriate Investment properties Properties that are held to earn commercial/market rate rentals or for capital appreciation, or both, are treated as investment properties and accounted for in accordance with Section 16 of FRS102. Investment properties include market rent, student let and commercial properties. Investment properties are accounted for at fair value and are professionally valued at each reporting date Basic Financial Instruments Rental Debtors (tenant arrears) and other debtors are recognised initially at transaction price less attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument. 30 asra housing Financial Statements 31

17 Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument Social housing grant Government grants are recognised using the accrual model and are classed as either 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 expense 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 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 Recycled Capital Grant Fund The Group has the option to recycle social housing grant, which would otherwise be repayable, for reuse on new developments. If unused within a three year period, it will be repayable to the either the Homes and Communities Agency or Greater London Authority (for London grant) with interest. Any unused recycled capital grant held within the fund, which it is anticipated will not be used within one year is disclosed in the balance sheet under creditors due after more than one year. The remainder is disclosed under creditors due within one year Other grants The capital costs of housing properties are stated net of capital grants receivable from public bodies. Grants in respect of revenue are credited to the income and expenditure account in the same period as the expenditure to which they relate Finance Issue Costs Arrangement fees (and other up front direct transaction costs), for both fixed and floating facilities, are calculated at facility level (which reflects the reality of the arrangement) and are apportioned evenly across all interest periods, effectively meaning that transaction costs are amortised on a straight line basis over the life of the loan. For the purposes of transition to FRS102 at 1st April 2014, the Association has adjusted the carrying value in the opening balance sheet (1st April 2014) for each fixed and floating rate loan to the nominal debt amount less the unamortised fees under UK GAAP for that loan. FRS102 paragraph requires that the unamortised fee balance is netted off against the loan liability Hedges Interest rate swaps relate to fixing variable rate interest and are therefore designated as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable transaction, which could affect profit or loss. They are measured at fair value at each reporting date. Gains and losses on cash flow hedges which are highly effective are recognised in other comprehensive income and accumulated in the cash flow hedge reserve. Any ineffective portion of a gain or loss on cash flow hedges is recognised in profit or loss. In order to apply hedge accounting, an economic relationship must exist between the hedged item and the hedging instrument. The Group must formally designate and document the hedging relationship at inception so that the risk being hedged, the hedged item and the hedging instrument are clearly identified, and the risk management objective and for undertaking the hedge. It is also required to determine and document the causes of hedge ineffectiveness. In a cash flow hedge, if the hedged future cash flows are no longer expected to occur, the amount that has been accumulated in the cash flow hedge reserve is reclassified from the cash flow hedge reserve to profit or loss immediately. All of the Group s stand-alone swaps satisfy the above criteria and the Group has chosen to test the effectiveness of its hedges annually. For ineffective hedges the movement in fair value has been recognised in the profit or loss Other tangible fixed assets Other freehold properties: Office buildings are depreciated down to their residual value over 50 years. Other fixed assets: Depreciation is charged on a straight line basis over the expected useful lives of other assets at the following annual rates:- Furniture, fixtures and fittings 10% & 20% Motor vehicles 20% Computer and office equipment 20% to 33.3% 1.20 Investments Investments are stated at market value Reserves Although under their Rules the Registered Providers do not trade for profit, the Board plans the Group s financial affairs so that each year income exceeds expenditure. This policy ensures that the Group has a margin of safety to manage unexpected expenditure or shortfalls in income. The annual surplus also enables the Group to meet its commitments to providers of private finance and continue to raise further private finance. The Board regularly reviews the Group s finances to determine the minimum amount of reserves required for day to day management of the group and to provide for the future. Any amounts over and above this minimum are invested in the provision of social housing Restricted reserves The restricted reserve is grant received from the Big Lottery Fund. This funding is held in a designated bank account as a requirement of the grant conditions. If the grant is not spent according to the agreement then it must be repaid to The Big Lottery and is therefore also included as a creditor Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event. It is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 32 asra housing Financial Statements 33

18 1.24 Impairment An assessment of whether indicators of impairment exist is carried out at each reporting date. If such an indicator exists an impairment assessment is carried out and the recoverable amount of the asset or cash generating unit is carried out. Any impairment in an income generating unit is recognised by a change to the Statement of Comprehensive Income. The following indicators of impairment are considered; government rent regime changes i.e. the 1% rent reduction announced in Summer : a change in government policy, regulation or legislation which has a material detrimental effect on the development programme or scheme; a contamination or other similar issue that was not identified as part of planning for a development which results in a material increase in development costs. e.g. identification of asbestos which requires material additional expenditure for removal of the asbestos in order to complete the development; a change in demand for a property that is considered irreversible; market value declining significantly more than would be expected in those circumstances where assets are intended or expected to be sold or where the occupant has the right to purchase under shared ownership arrangements; obsolescence of a property, or part of a property. e.g. regeneration or demolition planned. Where an indicator of impairment exists an impairment assessment is carried out as follows: the level at which an impairment is to be assessed is determined i.e. the asset or cash generating unit; the recoverable amount is estimated; the carrying amount is calculated; the carrying amount is compared to the recoverable amount to see if an impairment loss has occurred. An impairment loss occurs when the carrying amount of an asset or cash generating unit exceeds its recoverable amount. This impairment loss is charged to the Statement of Comprehensive Income as expenditure Stocks Stocks are stated at the lower of cost and net realisable value Leases Assets acquired under finance leases are capitalised and the outstanding future lease obligations are shown in creditors. Operating lease rentals are charged to the profit and loss account on a straight-line basis over the period of the lease Negative Goodwill on fair value exchanges Negative goodwill, being the excess of fair value of the underlying separable net assets over the fair value of the consideration, is shown as part of intangible fixed assets. An amount equal to the fair value of the non-monetary assets acquired is being released to the income and expenditure account commensurately with the recovery of the non-monetary assets acquired, whether through depreciation or sale Goodwill and Negative Goodwill on non-exchange transactions For non-exchange transactions (acquisitions in the social housing sector that are in substance a gift of one business to another), the fair value of the gifted recognised assets and liabilities is recognised as a gain or loss in the income and expenditure account in the year of transaction Prior Period Adjustment In these consolidated financial statements the Group has a prior period adjustment, of 0.6m additional cost of sale, relating to the disposal of the Highpoint Conference Centre in This has the effect of changing the previously stated GAAP reserves at 31 March from 83.6m to 83.0m. 34 asra housing Financial Statements 35

19 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 2 Particulars of turnover, operating costs and operating surplus Analysis of turnover Income and expenditure from lettings Turnover Operating costs Operating surplus/ (deficit) Turnover restated Operating costs Operating surplus/ (deficit) Housing accommodation 61,501 (43,797) 17,704 57,995 (41,078) 16,917 Supported Housing accommodation 1,471 (1,880) (409) 2,022 (3,104) (1,082) Housing for Older People 10,360 (6,859) 3,501 8,932 (2,640) 6,292 Shared ownership accommodation 2,648 (1,509) 1,139 2,372 (901) 1,471 75,980 (54,045) 21,935 71,321 (47,723) 23,598 Other income and expenditure Current asset property sales 7,515 (4,623) 2,892 5,971 (4,510) 1,461 Development costs written off 143 (252) (109) 292 (544) (252) Managed services 1,369 (1,034) (443) 184 Goodwill Amortisation Sub-let of offices (226) 106 Other 3,050 (1,503) 1,547 3,056 (1,366) 1,690 Market Rented 1,219 (1,177) 42 1,166 (1,318) (152) Impairment - (750) (750) Gain on disposal of property, plant and equipment - - 2, ,264 Total development administration costs capitalised were 1,111k (: 684k). 90,187 (63,383) 28,822 83,759 (56,130) 37,893 3 Particulars of income and expenditure from lettings restated Sheltered HOP Total Total Shared Ownership accommodation Supported Housing accommodation Housing Accommodation Income from lettings activities Rents receivable 54, ,242 6,699 64,316 59,629 Supporting people Service charges receivable 2, ,929 6,345 5,911 Net rents receivable 57,460 1,186 2,550 9,653 70,849 66,397 Amortisation of Social Housing Grant 4, ,901 4,578 Revenue grants from local authorities and other agencies Miscellaneous income from lettings Total income from lettings activities 61,501 1,471 2,648 10,360 75,980 71,321 Expenditure on lettings activities Services 3, ,985 6,355 5,178 Management 15,638 1, ,469 19,958 15,965 Pension effect of triennial actuarial valuation 2, ,654 - Day to day repairs 8, ,393 10,262 Planned maintenance 2, ,345 2,994 Major repairs and stock re-investment (92) Rent losses from bad debts Depreciation of housing properties 10, ,098 11,899 Impairment Total expenditure on lettings activities 43,797 1,880 1,509 6,859 54,045 47,723 Operating surplus from lettings activities 17,704 (409) 1,139 3,501 21,935 23,598 Void Losses ,061 1, asra housing Financial Statements 37

20 Notes to the Financial Statements for the year ended 31 March 4 Intra group transactions between regulated and non-regulated entities Asra Construction Services Limited (ACSL) provides design and build development services to LHA and to ASRA. It is not a registered provider and is therefore classified by the HCA as a non-regulated entity. Service Level and Framework Agreements are in place between LHA, ASRA and ACSL. Development services are provided to ACSL by both ASRA and LHA. Finance services are provided by LHA. These are recharged by ASRA and/or LHA at cost with an appropriate transfer pricing mark-up applied. ACSL recharges ASRA or LHA with design and build costs for development services carried out. ACSL has no employees. Aggregate costs recharged for the year ended 31 March are as follows: ACSL ASRA LHA ACSL ASRA LHA ACSL recharges - 25,578 2,701-21,793 13,902 ASRA development recharge ASRA finance recharge LHA development recharge LHA finance recharge asra housing Financial Statements 39

21 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 5 Units of accommodation group 6 Surplus on ordinary activities before taxation Social Housing Properties Number Number Surplus on ordinary activities before taxation is after charging/(crediting): Re-stated General needs housing 8,770 8,745 Affordable rent Intermediate rent Supported housing Shared ownership Housing for older people 1,306 1,304 Total Owned 12,011 11,858 Depreciation of housing properties and write off of replaced components 10,378 10,450 Depreciation on other tangible owned fixed assets 1,160 1,003 Amortisation of social housing grant (4,902) (4,578) Impairment of properties Operating lease payments Auditor s remuneration: Managed on behalf of others 1,214 1,148 Total Managed Social Housing 13,225 13,006 In their capacity as auditors In respect of other services General Needs Housing Supported Total Social Owned but managed by others Non-social housing 7 Sale of Properties Property Plant and Equipment Key workers Student accommodation Market rent Total Managed Non-social Housing Commercial Voluntary sales Shared ownership subsequent tranches Right to buy Total Total Proceeds of sale 1,610 3,739 2, ,585 12,503 Less: costs of sale (1,666) (2,790) (1,753) (219) (6,427) (5,184) Abated losses - - (116) (23) (139) 142 Net surplus on disposal (56) 949 1, ,019 7,461 Non-social owned but managed by others All Accommodation Owned 12,362 12,209 Managed 1,214 1,148 Total Managed 13,576 13,357 Total Owned but managed by others Total Stock 14,143 13,918 Investment Property Total Total Proceeds of sale - 7,266 Less: costs of sale - (4,463) Net surplus on disposal - 2, asra housing Financial Statements 41

22 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 8 Directors and senior staff emoluments Directors (including former directors) Staff emoluments (includes redundancy payments) Number Number Emoluments (including pension contributions and benefit in kind) Executive Directors Emoluments (including pension contributions and benefit in kind) Non-Executive directors Compensation payable to past directors in respect of loss of office The emoluments of directors disclosed above (excluding pension contributions, but including benefits in kind) include amounts paid to: The highest paid director Full time equivalent number of staff (including directors) whose remuneration payable (including compensation for loss of office, benefits in kind and pension contributions) was between: 60,000-70, ,001 to 80, The highest paid director refers to Matt Cooney, Group Chief Executive. The amount includes basic salary of 146,702 (: 143,544) and a car allowance. The Group Chief Executive is an ordinary member of the pension scheme as set out in note 27. The Non-Executive Directors were remunerated as follows: From 1 April : 20,890 per Group Chairman, 13,995 per Deputy Chairman, 11,832 per Chair of Committees and 8,967 per ordinary member per annum. From 1 April 2014: 20,440 per Group Chairman, 13,694 per Deputy Chairman, 11,088 per Chair of Committee s and 8,586 per ordinary member per annum. Only Group Board non-executive Directors receive remuneration, named individual remuneration and expenditure reimbursement details in compliance with Provision D11 of the NHF code can be found in the Operating & Financial Review. 80,001 to 90, ,001 to 100, ,001 to 110, ,001 to 120, ,001 to 130, ,001 to 140, ,001 to 150, ,001 to 160, ,000 to 170, Total Included above due to redundancy asra housing Financial Statements 43

23 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 9 Staff Costs 10 Interest payable and similar charges restated restated Staff costs including directors: Housing loans interest 13,463 12,842 Housing loan fees 1, Wages and salaries 13,436 11,438 Social security costs 1,161 1,098 Other pension costs Triennial actuarial valuation effect 3,654 - Pension unwinding cost Interest rate swap obligation 5,809 5,513 RCGF and DPF interest ,665 19,181 19,095 13,026 Average number of full time equivalent persons (including the directors) employed during the year: Number Number Less: Capitalised (2,039) (2,068) 18,626 17,113 Development and Assets Housing, Lettings and Care Central Services Total employees Interest rates charged on Housing Loans varied between 0.76% and 15.5% The average rate of interest charged on Housing Loans drawn down (including margins) was 3.73% Interest is capitalised on properties under construction using the weighted average interest rate for the whole facility (drawn and swaps) of 4.97%. 44 asra housing Financial Statements 45

24 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 11 Taxation 12 Tangible Fixed Assets Housing Properties Analysis of charge in year restated Housing properties held for letting Housing properties held for letting Completed shared ownership housing properties Shared ownership in the course of construction Total Current tax: UK corporation tax on surplus for year Adjustment in respect of prior year - 10 COST At 1 April as restated 919,092 22,115 47,788 4, ,755 Additions 3,719 27,711 5,455 1,308 38,193 Transfer (to)/ from current assets (5,152) 7,665 (9,008) 6,057 (438) Work to existing properties 7, ,646 Disposals -s/o staircasing - - (1,846) - (1,846) Total current tax (see below) Deferred tax current year charge (credit) - Deferred tax prior year adjustment - Total tax charge Factors affecting the tax charge for the year -s/o first sales - - (2,920) (1,692) (4,612) -Other (4,487) (4,487) Schemes completed 15,336 (16,041) 6,641 (5,936) - Write off of replaced components/ aborted schemes (1,175) (1,175) At 31 March 934,979 41,450 46,110 4,497 1,027,036 Surplus/(deficit) before taxation 11,990 (21) Tax charge at 20% (: 21%) 2,398 (4) Exempt charitable income (2,302) 265 Other permanent adjustments expenses not deductible for tax - - Depreciation on ineligibles less IBAs - - Capital allowances for period in excess of depreciation - - Short term timing differences - - Non taxable proportion of capital gains profit - - Utilisation of tax losses - (84) Non-taxable interest - - Marginal relief - - Current tax charge for the year (see above) DEPRECIATION At 1 April as restated 54,437-1,456-55,893 Charge for the period 10, ,216 Write-off of replaced components (954) (954) Impairment Fair value adjustment re. acquisition Transfer to current assets (11) (11) Eliminated on disposal (85) - (66) - (151) At 31 March 64, , ,860 NET BOOK VALUE At 31 March 870,607 41,075 44,372 4, ,176 At 31 March restated 864,655 22,115 46,332 4, ,862 restated Housing properties comprise: Freeholds 866, ,911 Long leaseholds 87,257 84,371 Short leasehold 6,258 7, , , asra housing Financial Statements 47

25 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 12 Tangible Fixed Assets Housing Properties continued 12 Tangible Fixed Assets continued - other Asra Housing Association Limited and Leicester Housing Association Limited commission Asra Construction Services Limited (ACSL) to undertake design and build development services. The profit generated by ACSL on these additions to fixed assets is eliminated on consolidation. Fixed assets include the fair value of assets acquired from: Freehold offices Furniture fixtures and fittings Computers and office equipment Motor vehicles Total Asset Depreciation COST At 1 April restated 5,200 1,049 2, ,980 Additions Family First 20,365 2,193 Black Roof Housing 10, Write-off s (187) (183) (1,280) (24) (1,674) At 31 March 5,013 1,095 1, ,108 Total works to existing properties are disclosed in the financial statements as: Capital works 7,646 9,635 Planned maintenance 3,418 3,093 Major repairs ,133 13,429 DEPRECIATION At April 1, , ,472 Charge for year ,160 Write-off s (187) (183) (969) (24) (1,363) At 31 March 1, , ,269 NET BOOK VALUE At 31 March 4, ,839 Finance leases The Group had no assets held under such leases at either year end. Such assets are generally classified as finance leases as the rental period amounts to the estimated useful economic life of the assets concerned and often contain the option to purchase the assets outright at the end of the minimum lease term by paying a nominal amount. Impairment The Group considers each scheme to represent separate cash generating units when assessing for impairment in accordance with the requirements of FRS102 and SORP During the current year, the Group has recognised an impairment cost of 750k ( - 152k) in respect of a development scheme and 152k impairment from was released as it is no longer necessary. At 31 March 4, , asra housing Financial Statements 49

26 Notes to the Financial Statements for the year ended 31 March 13 Investment properties Student Accommodation Market Rent Commercial Total At 1 April - 6,759 1,271 8,030 Additions Disposals revaluations At 31 March - 7,003 1,271 8,274 Commercial properties were professionally valued by Jones Lang LaSalle, chartered surveyors, an independent valuer, to fair value at 31st March 2014 and 31 March, with subsequent additions during -16 at cost. Investment properties, which are all freehold or long leasehold, were valued to fair value at 31 March 2014, and, based on a valuation undertaken by Savills (UK) Limited, RICS Registered Valuers, an independent valuer with recent experience in the location and class of the investment property being valued. The method of determining fair value was Market Value for Social Housing (MV-STT) using the discounted cash flow of the rental stream and significant assumptions applied were as follows: Based on market evidence from numerous sources; The property is not subject to any unusual or onerous restrictions; The building(s) is/are structurally sound. Freehold buildings with a carrying value of 609m have been pledged to secure borrowings of the Association. The Association is not allowed to pledge these assets as security for other borrowings or to sell them to another entity. If investment properties had not been revalued they would have been included at the following amounts: Student Accommodation Market Rent Commercial Total Cost 450 7,028 2,172 9,650 Depreciation (9) (304) (41) (354) Net Book Value At 31st March 441 6,724 2,131 9,296 At 31 March 441 6,724 2,131 9, asra housing Financial Statements 51

27 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 14 Fixed Asset Investments 16 Debtors due within one year restated Other loans The above investments have been provided as a mortgage to various NHS Trusts as part of joint partnership arrangements. They are measured at fair value with the future cash receipts discounted to net present value. Rental debtors 4,562 4,549 Less: provision for bad debts (2,039) (2,126) 2,523 2,423 Other debtors Prepayments and accrued income 557 1,383 3,654 4, Stocks and work in progress restated Consumable stocks Housing stock for sale 73 - Social rented completed units 673 1, Short Term Investments GROUP AND ASSOCIATION Fixed term cash deposits Collateral 14,720 18,140 14,720 18,240 Social rented under construction 1, Shared Ownership completed units 2,317 2,050 Shared Ownership under construction 4,562 3,331 Commercial completed units Commercial under construction 1, Outright sales completed units - 1,261 Outright Sales under construction 2,313 2,156 Market rent completed Market rent under construction ,376 11,957 During -16, at the request of the lenders, cash collateral of 14,720k (: 18,140k) has been lodged with Lloyds, Santander and The Royal Bank of Scotland to secure mark to market (MTM) positions with swap counter-parties. This collateral is included within current asset investments in the balance sheet. The intention is to secure MTM positions with property security. Until property is charged the Group does not have access to this investment balance. 52 asra housing Financial Statements 53

28 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 18 Creditors (amount falling due within one year) 19 Creditors (amount falling due after more than one year) restated Housing loans (note 19) 12,547 3,854 Trade creditors 1,847 1,654 Corporation tax Other taxation & Social security costs Accruals and deferred income 15,893 17,224 Recycled Capital Grant Fund (note 24) Disposal Proceeds Fund (note 25) 12 1,481 Pension deficit contributions 1, Deferred capital grant (note 20) 4,902 4,902 Onerous contract 26 - restated Housing loans 404, ,844 Issue Costs (2,450) (2,717) Loan premium Pension deficit contributions 9,686 7,297 Recycled capital grant fund (note 24) 1, Disposal proceeds fund (note 25) Onerous contract Deferred capital grant (note 20) 438, ,866 Derivatives financial instruments 77,609 70, , ,833 The average time take to pay creditors is 30 days (: 30 days). 37,499 30,914 Housing Loan amounts repayable by instalments: Repayable within one year 12,547 3,854 Repayable between one to two years 45,909 12,569 Repayable between two to five years 43,334 79,210 Repayable after five years 315, , , ,698 Add: Loan premium Less: Issue Costs (2,450) (2,717) 414, , asra housing Financial Statements 55

29 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 20 Deferred Capital Grant 22 Financial Instruments restated The carrying values of the Group s financial assets and liabilities are summarised by category below: At 1st April 447, ,336 Grants received during the year 1,663 6, Grants recycled to the RCGF and DPF (notes 24 and 25) (1,223) (1,141) Grants transferred out as part of stock swap with another RP - (2,042) Released to income during the year (4,902) (4,578) At 31st March 443, ,768 Financial Assets Measured at fair value through the Statement of Comprehensive Income: Cash and cash equivalents 30,692 46,497 The original total value of the grant 502, ,977 Amount recognised in the Statement of Comprehensive Income 59,111 54,209 Measured at discounted amount receivable: - Fixed asset investments (note 14) Due within one year 4,902 4,902 Due after one year 438, ,866 Measured at undiscounted amount receivable: - Rent arrears and other debtors (note 16) 3,654 4, Provisions Onerous contract 000 Total 000 Balance at 31 March Provisions used during the year (12) (12) Balance at 31 March Total 34,871 51,670 Financial Liabilities 000 Measured at fair value and designated in a hedging relationship 77,609 70,867 Financial liabilities measured at fair value at amortised cost 857, ,749 Financial liabilities measured at fair value through statement of comprehensive income 31,793 30,541 Total 967, ,157 The present obligation under the contract is recognised and measured as a provision for onerous contracts within creditors 56 asra housing Financial Statements 57

30 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 22 Financial Instruments continued 23 Derivative Financial Instruments continued The Group s income, expense, gains and losses in respect of financial instruments are summarised below: Interest Rate Swap Contracts Interest income and expense 000 The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at 31st March: Interest rate swap contracts designated as hedges of variable interest rate risk recognised financial liabilities Total interest income for financial assets at amortised cost Total interest expense for financial liabilities at amortised cost (18,626) (17,113) Average contract fixed interest rate Average contract fixed interest rate Fair value Fair value gains and losses Effective hedges % % On financial assets (including listed investments) measured at fair value through the Statement of Comprehensive Income (6,742) (34,521) Outstanding receive floating rate pay fixed contracts 23 Derivative Financial Instruments Current Non-current 0-1 years years Over 5 years , ,000 30,752 22,716 At 31 March , ,000 30,752 22,716 Not effective Derivatives that are designated and effective as hedging instruments carried at fair value Outstanding receive floating rate pay fixed contracts Liabilities Interest rate swaps 30,752 22,716 Non-hedged instruments carried at fair value - - Interest rate swaps 46,856 48, ,608 70, years years Over 5 years ,000 46,856 48,151 At 31 March ,000 46,856 48,151 Total Hedges , ,000 77,608 70,867 Interest rate swaps are valued at present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is three months LIBOR. The Group will settle the difference between the fixed and floating interest rate on a net basis. All interest rate swap contracts are designated as hedges of variable rate interest rate risk of the Group s floating rate borrowings in accordance with FRS102 with varying degrees of effectiveness. The hedged cash flows are expected to occur and to affect profit or loss over the period to maturity of the interest rate swaps. Losses of 8,036k (: 14,484k) were recognised in other comprehensive income representing the effective component of the swap. The ineffective components of 1,294k gain (: loss of 20,037k) representing the excess of the fair value of hedging instruments over the change in the fair value of expected cashflows were recognised in profit or loss. 30,752k (: 22,716k) was reclassified to profit or loss for the year. 58 asra housing Financial Statements 59

31 Notes to the Financial Statements for the year ended 31 March 23 Derivative Financial Instruments continued The Group has twelve cash flow hedges. The hedge relationships meet each condition for hedge accounting, which are consistent with the entity s risk management objectives for undertaking hedges. The group considers that an economic relationship exists between the hedging instrument (interest rate swap) and the hedged item (floating rate loan) in that the values of the hedged item and hedging instrument are expected to typically move in opposite directions in response to movements in the same risk, the hedged risk, over the life of the hedge. The objective of the hedge is to mitigate the changes in the future cash flows stemming from the floating rate interest payments related to the floating rate loan entered into by the group. In accordance with chapter 12 of FRS 102, hedge accounting has been applied to the following swap contracts: AHA '000 '000 Lloyds 50m 1.413% 12th October ,066 - Santander 10m 4.84% 25th June2026 3,384 3,507 Lloyds 10m 4.70% 5th October ,622 4,419 Lloyds 20m 4.79% 4th January ,903 10,272 Lloyds 15m 4.44% 13th May ,965 7,262 Santander 10m 4.32% 4th July ,118 5,290 33,058 30,750 LHA '000 '000 Lloyds 20m 4.48% 26th February ,327 7,962 Lloyds 15m 4.39% 5th November ,680 7,024 Lloyds 15m 4.44% 13th May ,965 7,261 Lloyds 15m 4.37% 26 February ,561 7,728 Lloyds 10m 3.85% 13 November ,885 4,964 RBS 10m 3.90% 04 October ,133 5,178 44,551 40,117 The Hedged Items have a variable interest rate risk associated with the LIBOR linked bank loan. The counterparty to the swap and the credit risk associated is considered to be low. Credit risk is reflected in the Credit Valuation Adjustment amount to the risk free fair value of the derivative instrument. 60 asra housing Financial Statements 61

32 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 24 Recycled Capital Grant funding 25 Disposal Proceeds Fund Opening balance Inputs to reserve Grants recycled Interest accrued - 78 Recycling of grant: New build - (572) Other (4) (119) Opening balance 2,066 1,571 Inputs to reserve: Grants recycled - Greater London Area Grants recycled outside GLA 2 - Interest accrued - 51 Recycling of grant: - - New build - - Cash repaid on expiry of three year investment period (1,503) (23) Closing balance 1, Closing balance 790 2, Payable within one year Payable greater than one year 1, , Payable within one year 12 1,481 Payable greater than one year ,066 The regulator may require repayment of amounts 3 years or older of 320k (: 47k) The regulator may require repayment of amounts 3 years or older of 47k (: 1,503k). 62 asra housing Financial Statements 63

33 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 26 Called up share capital 28 Pension obligations Allotted, issued and fully paid: At 1 April 4 6 Issued during the year 4 - Cancelled during the year - (2) At 31 March 8 4 The shares of the Association, each of 1.00 nominal value, carry no rights to a dividend or provision for redemption or a distribution on winding up. The members are entitled to a vote at annual and special meetings of the Association. Defined Contribution Defined Contribution Scheme - 1 All colleagues eligible to join The Group participates in the defined contribution schemes of the Social Housing Pension Scheme ( SHPS or the Scheme ). Members have the choice of paying contributions of between 4% and 6% of salary with the employer (LHA or ASRA) matching these contributions. Members can pay more than 6% if they wish but the maximum employer contribution rate will be 6%; This benefit structure is for all new starters and current colleagues who wish to join the scheme; Defined Contribution Scheme - 2 Closed Scheme to new entrants from 31 December Members will have (members switching over from the CARE 1/60th section on 1 Jan 2014) the choice of paying contributions of between 4% and 6% of salary with the employer matching these contributions, plus the employer paying an additional 4%. Members can pay more than 6% if they wish but the maximum employer contribution rate will be 10%. 27 Operating lease obligations At 31 March the Group was committed to non-cancellable operating lease minimum future payments for each of the following periods: Accordingly, the contribution rates payable (as a % of salary) will be as set out in the table below. Member Contribution Member Contribution Total Contribution of Salary to be invested. 4% 4% 12% 5% 5% 14% 6% 6% 16% Land and buildings Other Operating leases which expire: Less than 1 year Within 1 to 5 years 886 1,080-7 After 5 years 2,140 2, ,395 3, Defined Contribution Scheme - 3 Auto Enrolment Scheme. All eligible jobholders have been auto enrolled with effect from 1 May Initially members contribute 1% of pensionable salary and the employer (LHA or ASRA) also contributes 1% of pensionable salary. Based on current legislation, the contributions are then expected to be increased over a phased period as follows: From 1 October % from the employer and 2.5% from the employee. From 1 October % from the employer and 4% from the employee. Until 31 December 2013 the Group participated in the Social Housing Pension Defined Benefit Scheme (the scheme). The Scheme is funded and is contracted out of the state scheme. It is not possible in the normal course of events to identify on a consistent and reasonable basis the share of underlying assets and liabilities belonging to individual participating employers. This is because the Scheme is a multi-employer scheme where the Scheme assets are co-mingled for investment purposes, and benefits are paid from total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. 64 asra housing Financial Statements 65

34 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 28 Pension obligations - continued 28 Pension obligations - continued Defined Benefit The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to address the level of future contributions required so that the Scheme can meet its pension obligations as they fall due. The last formal valuation of the Scheme was performed as at 30 September 2011 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme s assets at the valuation date was 2,062m. The valuation revealed a shortfall of assets compared with the value of liabilities of 1,035m, equivalent to a past service funding level of 67%. The Scheme Actuary is currently finalising the 2014 valuation but key provisional results have been confirmed. As at 30 September 2014, the market value of the Scheme s assets was 3,123m. There was a shortfall of assets compared with the value of liabilities of 1,323m, equivalent to a past service funding level of 70%. LHA and ASRA have been notified by the Pensions Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme based on the financial position of the Scheme as at 30 September As of this date the estimated employer debt is 41,568,051 and 17,496,078 respectively. Deficit contributions From 1 April 2010 to 30 September 2010: A cash amount equivalent to 7.5% of members earnings per annum (payable monthly and increasing by 4.7% each year on 1st April). From 1 April 2013 to 30 September 2026: A cash amount equivalent to 3.1% of members earnings per annum (payable monthly and increasing by 3% each year on 1st April). From 1 October 2020 to 30 September 2023: A cash amount equivalent to 3.1% of members earnings per annum (payable monthly and increasing by 4.7% each year on 1st April). The contributions are expressed by SHPS in nominal pound terms (for each employer) increasing each year at the stated amount. The contributions are calculated by proportioning the nominal pound payment at the time of the change. Earnings at 30 September 2008 (for each employer) are used as a reference point for calculating these contributions. The recovery plan contributions are allocated to each participating employer in line with their estimated share of the scheme liabilities. Where the scheme is in deficit and where the Association has agreed to a deficit funding arrangement the Association 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 value of provision Present value of provision Reconciliation of opening and closing provisions ,980 8, Provision at start of year 8,242 8,837 Unwinding of the discount factor (interest expense) Deficit contributions paid (947) (907) Remeasurements effect of triennial actuarial valuation 3,654 - Remeasurements impact of any change in discount factor (167) 99 Income and expenditure impact 10,980 8, Interest expense Remeasurements impact of any change in discount factor (167) 99 Remeasurements amendments to the contribution schedule 3, Costs recognised in the income and expenditure account 3, Assumptions % per annum % per annum Rate of discount 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. 66 asra housing Financial Statements 67

35 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 29 Reserves 31 Consolidated cash flow statement The cash flow hedge reserve represents the hedged cash flows that are expected to affect surplus or deficit over the period to maturity of the interest rate swaps. 88k of the restricted reserve is grant received from the Big Lottery Fund. This funding is held in a designated bank account as a requirement of the grant conditions. If the grant is not spent according to the agreement then it must be repaid to The Big Lottery and is therefore also included as a creditor. The restricted reserves are reserves to be spent for the tenants benefit. For example, holiday home reserve. Cash Flow from operating activities Note Surplus for the year 11,894 (198) Adjustments for non-cash items: Depreciation of tangible fixed assets 12,438 13,347 Amortisation of intangible assets (911) (994) Decrease/(increase) in stock (1,419) 2, Decrease/(increase) in trade and other debtors 730 (812) Increase/(decrease) in trade and other creditors (787) 4, Negative Goodwill Negative goodwill Re-stated At 1 April - restated 15,502 Amortisation of goodwill (911) At 31 March 14,591 Pension costs less contributions payable 2,706 (310) Carrying amount of tangible fixed asset disposals 6,398 7,071 Capital grants received - - Sale of other fixed assets - - Movement in fair value of assets (1,538) 20,966 Corporation tax Adjustments for investing or financing activities: Proceeds from the sale of tangible fixed assets (8,586) (17,331) Government grants utilised in the year (4,902) (4,578) Negative goodwill arose when the fair value of assets arising from the acquisition of a business was in excess of the fair value of the consideration given. An amount equal to the fair value of the non-monetary assets acquired is being released to the profit and loss account commensurately with the recovery of the non-monetary assets acquired, whether through depreciation or sale. Interest payable 18,626 16,798 Interest received (256) (167) 34,489 41, asra housing Financial Statements 69

36 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 32 Capital Commitments 33 Transition to FRS Expenditure contracted for but not provided in the financial statements 74,297 92,562 Expenditure authorised by Board but not contracted for 35,193 47,530 The Group has successfully completed its Affordable Homes Programmes with both the Greater London Authority (GLA) in London and the Homes & Communities Agency (HCA) in the Midlands. Furthermore, the Group has now secured a fresh Social Housing Grant (SHG) allocation to deliver a similar sized Development programme over the current four year period from April through to March 2019, the majority of which will be in London with SHG funding from the GLA, whilst from now on, there will only be modest levels of development in the Midlands, again with SHG funding from the HCA. 109, ,092 The loan facilities are being arranged to deliver the anticipated programme. The Business Plan also demonstrates the Group s ability to service its debts, secure loans and repay long term loans as they fall due. This is the first year that the Group has presented its financial statements under Financial Reporting Standard 102 ( FRS102 ) 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 and the date of transition to FRS102 was therefore 1 April As a consequence of adopting FRS 102 a number of accounting policies have changed to comply with that standard. Reconciliation of net assets and reserves at 1 April 2014 for the Group date of transition to FRS 102 Note In carrying out the transition to FRS102, the Group has applied the following exemption as permitted by Section 35 Transition to this FRS : 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. Reserves as at 1 April 2014 Reserves as at 1 April 2014 Reserves as at 31 March As previously stated under former UK GAAP: restated ,551 24,433 82,984 Revaluation to fair value of fixed asset investments (122) 13 (109) Pension Deficit contributions (8,838) 597 (8,215) Revaluation of investment properties to market value 578 (1,025) (447) Revaluation of commercial properties to market value 1,519 (2,337) (818) Financial Instruments at fair value (36,346) (34,520) (70,866) Holiday Pay accrual (58) (4) (62) Onerous contract (438) 6 (432) Depreciation expense (1,522) (4,549) (6,071) Amortisation of Social Housing Grant 49,631 4,578 54,209 Amortisation of negative goodwill 477 (632) (155) As stated in accordance with FRS ,432 (13,440) 50, asra housing Financial Statements 71

37 Notes to the Financial Statements for the year ended 31 March Notes to the Financial Statements for the year ended 31 March 33 Transition to FRS102 - continued Fixed asset investments FRS 102 requires that investments be measured at fair value with changes in fair value recognised in the Statement of Comprehensive Income. Under previous UK GAAP, the Group s accounting policy for both fixed and current asset investments was to measure them at cost less impairments. The effect of the change has been to decrease reserves and to increase surplus for the year ended 31 March. Multi Employer defined benefit pension scheme Under previous UK GAAP the Social Housing Pension Scheme, a multi employer, defined benefit pension scheme of which both asra and Leicester Housing Association s are members, 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 it continues to account for the scheme as a defined contribution scheme. When 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 8,838k. In the year to 31 March a credit was recognised in surplus in the Statement of Comprehensive Income and the liability at 31 March was 8,215k. Investment properties FRS 102 requires that changes in the fair value of investment properties be recognised in surplus or deficit for the year. Under previous UK GAAP these changes were recognised outside of surplus or loss and presented separately in a revaluation reserve. Financial instruments derivative contracts (interest rate swaps) This adjustment relates to the recognition of the fair value of derivative financial instruments held by the Group as at 1 April 2014 and as at 31 March. The Group uses derivative financial instruments to reduce exposure to interest rate movements. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in surplus or deficit immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in surplus or deficit depends on the nature of the hedge relationship. This adjustment has resulted in a decrease to the opening reserves of 36m and a decrease to the reserves position as at 31 March of 71m. 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 employees service is received. This has resulted in the Association recognising a liability for holiday pay of 58k 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 an additional charge of 4k was recognised in the Statement of Comprehensive Income and the liability at 31 March was 62k. Depreciation and Amortisation of Social Housing Grant Under FRS 102 social housing grant ( SHG ) is no longer set against housing property within fixed assets and depreciation is charged on the gross amount. The SHG is held as a creditor and amortised over the life of the structure of the property. The effect on the 1 April balance sheet is the movement of 448m SHG to long term creditors (with the estimated amortisation charge for -16 shown in short term creditors). Movements to the long term creditor grants during are shown in Note 20. 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 item is: 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 institution repayable on demand. The FRS 1 definition is more restrictive. 72 asra housing Financial Statements 73

38 Notes to the Financial Statements for the year ended 31 March 34 The subsidiary companies The Association has subsidiary companies (held at nil value) as follows: Leicester Housing Association Limited - Charitable Community Benefit Society Asra Housing Association Limited - Charitable Community Benefit Society The subsidiaries have subsidiary companies (held at nominal value) as follows: Newlight Properties Limited - Limited by shares - Dormant, 100 ordinary shares at 1 Sandy Hill (Woolwich) Limited - Limited by shares - Dormant, 1 ordinary share at 1 Asra Construction Services Limited - Limited by shares - 1 Ordinary share at 1 These accounts consolidate the results of the above subsidiaries. 35 Legislative provisions Asra Housing Group Limited is a registered Housing Association Community Benefit Society Homes and Communities Agency Registration number 30442R L asra housing Financial Statements 75