group accounts 2005
DESCRIPTION
East Thames Group financial accounts 2005TRANSCRIPT
i
GROUP ACCOUNTS
ii
East Thames Group Limited Board Members, Senior Staff, Auditors and Solicitors
Registered Charity 1084952Registered under the Companies Act 1985 4091100Registered by The Housing Corporation No. LH 4309
BoardChairman: Mr R Henchley (to Sept 2004)
Mr R Chilton (from Sept 2004)
Vice Chair: Mr J Mallender
Treasurer: Mr C Villiers
Other Members: Mr O Olanrewaju
Mr B Robertson
Mr J Norman
Mr G McLeary
Mr C Dankwa
Ms C Thomas (to Mar 2005)
Mr D Edwards
Mr D Goodman
Mr A Bridgwater
Senior StaffGroup Chief Executive: Ms J Barnes
Deputy Chief Executive: Mr M Heys
Assistant Chief Executive: (Regeneration and New Business) Mr F Vickery (to Jan 2005)
Group Director of Development: Mr S Tarry
Group Director of Technical Services: Mr K Carter (to Nov 2004)
Group Director of Corporate Services: Ms D Boakye
Director of Information Technology: Ms J Kutner
Group Company Secretary: Mr H Potter
Solicitors DevonshiresSalisbury HouseLondon WallLondon EC2M 5QY
Trowers and HamlinsSceptre Court40 Tower HillLondon EC3N 4DX
Auditors KPMG LLP1 Forest GateBrighton RoadCrawleyWest Sussex RH11 9PT
Bankers Barclays Bank plcBusiness BankingPO Box 5441st Floor54 Lombard StreetLondon EC3V 9EX
Registered Office 3 Tramway AvenueStratfordLondon E15 4PN
CONTENTS01 Report of the Board 04 Report of the auditors 05 Consolidated balance sheet 06 Consolidated income and
expenditure account07 Consolidated cash flow statement 08 Parent balance sheet 09 Parent income and expenditure
account10 Parent cash flow statement 11 Notes to the financial statements
EAST THAMES GROUP LIMITED
FinancialStatements31 March 2005
EAST THAMES GROUP LIMITED
Report of the Board
The Board presents its report and audited financial statements for the year ended 31 March 2005.
Legal statusThe Group is a charity, registered under the Companies Act 1985 and is a Registered Social Landlord under the Housing Act 1996. On 1 April 2001 it assumed responsibility as the parent company for four operating subsidiaries, East Homes Limited (formerly East Thames Housing Association Limited), East Living Limited (formerly East Thames Care Limited), East Choice Limited (formerly Boleyn & Forest Housing Society Limited), and East Potential (formerly Network East Foyers). On 31 December 2001, it assumed responsibility as the parent company for East Street Services Limited, a company established to undertake the Group’s non-charitable activities.
Principal activitiesThe parent company’s principal activities are the provision of central services to its operating subsidiaries. The four operational subsidiaries are East Homes Limited which provides social housing, East Choice Limited which provides low cost home ownership, East Living Limited which provides care and supported housing, and East Potential which manages foyers on behalf of the Group.
Review of the yearThe year again saw significant growth. During the year the Group has added 111 units of accommodation taking its portfolio of propertiesto 11,301 units.
During the year, the Group spent £59.7 million acquiring and developing its housing stock and an additional £5.2 million (including improvements on housing for rent, aids and adaptations and estate improvements) on its continuing substantial programme of rehabilitating, modernising and repairing its housing stock. It is the intention to fully upgrade each property at least every 25 years.
Performance for the yearThe Group achieved a surplus for the year of £4.7 million (2004: £8.1 million). Revenue reserves have increased to £50 million (2004: £45.5 million) and restricted, designated reserves and consolidated reserves total £5.5 million (2004: 5.1 million).
Disabled employeesApplications for employment from disabled persons are given full and fair consideration for all vacancies, having regard to their particular aptitude and abilities. In the event of employees becoming disabled, every effort is made to retain them in order that their employment within the organisation may continue. It is the policy of the Group that training, career development and promotion opportunities should be available to all employees.
Health and SafetyThe Group takes its responsibilities for Health and Safety very seriously and has established a training and implementation programme, led by a health and safety committee dedicated to this topic.
Employee involvementThe Group has continued its practice of consulting and keeping employees informed on matters affecting them and on the progress of the Group. This is carried out in a number of ways including a formal forum for consultation, departmental meetings and a variety of newsletters.
01
EAST THAMES GROUP LIMITED
Report of the Board (continued)
DonationsThe Group made charitable donations during the year amounting to some £12,737. No donations were given to charities of which Board members are Trustees.
Internal ControlsThe Board has overall responsibility for establishing and maintaining the whole system of internal control and for reviewing its effectiveness. This applies to all companies within the East Thames Group.
The Board recognises that no system of internal control can provide absolute assurance or eliminate all risk. The system of internal control is designed to manage risk and to provide reasonable assurance that key business objectives and expected outcomes will be achieved. It also exists to give reasonable assurance about the preparation and reliability of financial and operational information and the safeguarding of the Group’s assets and interests.
In meeting its responsibilities, the Board has adopted a risk-based approach to internal controls which are embedded within the normal management and governance process. This approach includes the regular evaluation of the nature and extent of risks to which the Group is exposed and is consistent with Turnbull principles as incorporated in the Housing Corporation’s circular R2-25/01: Internal Controls Assurance.
The process adopted by the Board in reviewing the effectiveness of the system of internal control, together with some of the key elements of the control framework includes:
Identification and evaluation of key risksManagement responsibility has been clearly defined for the identification, evaluation and control of significant risks. There is a formal and on-going process of management review in each area of the Group’s activities. This process is co-ordinated through a regular reporting framework by the Group Risk Management and Audit Committee. The Group Executive and Officer Risk Management Panel regularly consider reports on significant risks facing the Group. The Group Chief Executive/relevant Managing Director is responsible for reporting to the respective Board(s) any significant changes affecting key risks.
Monitoring and corrective actionA process of control self-assessment and regular management reporting on control issues provides hierarchical assurance to successive levels of management and to the Board. This process continues to be developed to ensure a rigorous approach and includes action for ensuring that corrective action is taken in relation to any significant control issues.
Control environment and control proceduresThe Board retains responsibility for a defined range of issues covering strategic, operational, financial and compliance issues including treasury strategy and new investment projects. The Board has adopted the National Housing Federation Code of Governance – Competence and Accountability. This is used as a basis for the Group’s policies with regard to quality, integrity and ethics. It is supported by a framework of policies and procedures, with which employees must comply. These cover issues such as delegated authority, segregation of duties, accounting, treasury management, health and safety, data and asset protection and fraud prevention and detection.
02
Internal Controls (continued)Information and financial reporting systemsFinancial reporting procedures include detailed budgets for the year ahead and forecasts for subsequent years. These are reviewed and approved by the Board. The Board also regularly review key performance indicators to assess progress towards the achievement of key business objectives, targets and outcomes.
The internal control framework and the risk management process are subject to regular review by Internal Audit who are responsible for providing independent assurance to the Board via its Group Audit and Risk Management Committee. The committee considers internal control and risk regularly during the year.
The Board has received the Group Chief Executive’s annual report, has conducted its annual review of the effectiveness of the system of internal control and has taken account of any changes needed to maintain the effectiveness of the risk management control process.
The Board confirms that there is an on-going process for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year under review, up to the date of the annual report, and is regularly reviewed by the Board.
In addition to the above the Group has implemented a number of changes to its approach and day to day management of risk and audit matters, applying current best practice to both areas of its work.
Statement of responsibilities of the BoardThe Companies Act 1985 and the Housing Act 1996 require the Board to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the surplus of the Group for that period. In preparing those financial statements the Board has:
• selected suitable policies and applied them consistently;
• made judgements and estimates that are reasonable and prudent;
• followed applicable accounting standards, subject to any material departures disclosed and explained in the financial statements; and
• prepared the financial statements on a going concern basis
The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and ensure that the financial statements comply with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2000. It is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
AuditorsThe Group is in the process of carrying out a periodic audit tender and will propose a resolution at the forthcoming Annual General Meeting for the appointment of the successful firm as auditors.
H.A. POTTERGroup Company Secretary
EAST THAMES GROUP LIMITED
Report of the Board (continued)
03
EAST THAMES GROUP LIMITED
Report of the independent auditors, KPMG LLP, to the members of East Thames Group LimitedWe have audited the financial statements on pages 5 to 31.
This report is made solely to the Company’s members as a body, in accordance with Schedule 1 paragraph 16 and 18 to the Housing Act 1996 and the Companies Act 1985 respectively. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Board and AuditorsThe Company’s Board is responsible for preparing the Board’s report and, as described on page 3, the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Housing Corporation and by our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2000. We also report to you, if in our opinion, a satisfactory system of control over transactions has not been maintained, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding the directors’ remuneration and transactions with the Company are not disclosed.
We read the other information accompanying the financial statements and consider whether it is consistent with those statements. We consider
the implications for our report if we become aware of any apparent misstatement or material inconsistencies with the financial statements.
Basis of audit opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Board in the preparation of the financial statements and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
OpinionIn our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 March 2005 and of their surplus for the year then ended and have been properly prepared in accordance with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2000.
KPMG LLP
Chartered AccountantsRegistered Auditor1 Forest GateBrighton RoadCrawley, West Sussex RH11 9PT
04
EAST THAMES GROUP LIMITED
Consolidated balance sheet at 31 March 2005
Note 2005£’000
2004£’000
Tangible fixed assets
Housing properties at valuation 10 445,943 403,639
Other fixed assets 11 11,709 8,515
457,652 412,154
Investments
Cost of Homebuy 10 38,766 37,209
Less Social Housing Grant (38,766) (37,209)
– –
Current assets
Investments 12 1,724 4,508
Stock 13 11,409 7,418
Debtors 14 7,805 9,088
Cash at bank and in hand 15 4,398 2,274
25,336 23,290
Creditors: amounts falling due within one year 16 (40,245) (27,785)
Net current liabilities (14,909) (4,495)
Total assets less current liabilities 442,743 407,659
Creditors: amounts falling dueafter more than one year 17 177,595 164,779
Provision for liabilities and charges 20 100 100
Capital and reserves
Share capital 21 - -
Revenue reserve 22 50,169 45,516
Designated reserve 22 3,491 1,953
Restricted reserve 22 1,791 2,912
Consolidation reserve 22 263 263
Revaluation reserve 22 209,334 192,136
265,048 242,780
442,743 407,659
05
The financial statements were approved by the Board on 22 August 2005 and signed on its behalf by:
ROBERT CHILTON CHARLES VILLIERS HENRY POTTERChairman Treasurer Group Company Secretary
EAST THAMES GROUP LIMITED
Consolidated income and expenditure accountfor the year ended 31 March 2005
Note2005
£’0002004
£’000
Turnover 2 72,584 66,700
Operating costs 2 (63,021) (56,145)
Operating surplus 9,563 10,555
Surplus on property disposals 4 4,585 6,410
Net interest payable and similar charges 7 (9,450) (8,837)
Surplus for the year 22 4,698 8,128
Transfer from revaluation reserve 22 372 25
Transfer (to)/from designated reserves 22 (1,538) 116
Transfer (to)/from restricted reserves 22 1,121 325
Unallocated surplus 4,653 8,594
Revenue reserves brought forward 45,516 36,922
Revenue reserves carried forward 50,169 45,516
Consolidated Statement of total recognised surplusesand deficits for the year ended 31 March 2005
2005£’000
2004£’000
Surplus for the year 4,698 8,128
Unrealised surplus on revaluation of housing properties 10 17,570 55,932
Prior year adjustment - Revaluation – 43,552
Total recognised surpluses for the year 22,268 107,612
Note of historical cost surpluses and deficitsfor the year ended 31 March 2005
2005£’000
2004£’000
Surplus on ordinary activities before taxation 4,698 8,128
Excess of actual depreciation over historical cost depreciation 255 –
Realisation of property revaluation surpluses of previous years 117 25
Historical cost surplus on ordinary activities before taxation 5,070 8,153
Historical cost surplus for the year after taxation and gift aid 5,070 8,153
All turnover and operating surpluses are attributable to continuing operations.
06
The financial statements were approved by the Board on 22 August 2005 and signed on its behalf by:
ROBERT CHILTON CHARLES VILLIERS HENRY POTTERChairman Treasurer Group Company Secretary
Note2005
£’0002004
£’000
Net cash flow from operating activities 24 4,972 27,028
Returns on investments and servicing of finance
Interest received 169 538
Interest paid (10,153) (9,071)
Net cash outflow on servicing of finance (9,984) (8,533)
Capital expenditure and financial investments
Purchase and construction of housing properties (56,865) (45,263)
Purchase of other fixed assets (4,206) (3,824)
Purchase of investments (2,315) (26,819)
Social Housing Grant received 12,769 40,730
Other capital grants repaid (1,679) (224)
Proceeds of first tranche sales 18,187 7,300
Proceeds from Homebuy 1,072 990
Sales of housing properties 8,629 11,429
Sales of other fixed assets 35 19
Sales of investments 2,784 8,713
Cash outflow from investing activities (21,589) (6,949)
Cash (outflow)/inflow before financing (26,601) 11,546
Financing
Housing loans received 31,489 6,379
Housing loans repaid (5,906) (18,387)
Cash inflow/(outflow) from financing 25 25,583 (12,008)
Corporation Tax – (150)
Gift Aid – (116)
Decrease in cash in the period 25 (1,018) (728)
EAST THAMES GROUP LIMITED
Consolidated cash flow statement for the year ended 31 March 2005
07
Note2005
£’0002004
£’000
Tangible fixed assets 11 3,676 741
Current assets
Debtors 14 7,420 1,026
Cash at bank and in hand 15 - 982
7,420 2,008
Creditors: amounts falling due within one year 16 (8,152) (367)
(732) 1,641
Total assets less current liabilities 2,944 2,382
Capital and reserves
Reserves 22 713 680
Restricted reserves 22 1,750 -
Designated reserves 22 481 1,702
2,944 2,382
EAST THAMES GROUP LIMITED
Parent balance sheet at 31 March 2005
08
The financial statements were approved by the Board on 22 August 2005 and signed on its behalf by:
ROBERT CHILTON CHARLES VILLIERS HENRY POTTERChairman Treasurer Group Company Secretary
Note2005
£’0002004
£’000
Turnover 2 12,427 9,239
Operating costs 2 (11,865) (8,389)
Operating surplus 562 850
Net interest receivable 7 - 69
Surplus on ordinary activities 562 919
Transfer from designated reserves 22 (529) -
Unallocated surplus 33 919
Revenue reserves brought forward 680 (239)
Revenue reserves carried forward 713 680
EAST THAMES GROUP LIMITED
Parent income and expenditure accountfor the year ended 31 March 2005
09
The financial statements were approved by the Board on 22 August 2005 and signed on its behalf by:
ROBERT CHILTON CHARLES VILLIERS HENRY POTTERChairman Treasurer Group Company Secretary
Note 2005£’000
2004£’000
Net cash (outflow)/inflow from operating activities 24 (356) 1,688
Returns on investments and servicing of finance
Interest received - 69
Net cash inflow on investments and servicing of finance - 69
Cash (outflow)/inflow before financing (356) 1,757
Purchase of fixed assets (3,397) (741)
Gift aid (371) (34)
(Decrease)/Increase in cash in the period 25 (4,124) 982
Parent cash flow statementfor the year ended 31 March 2005
EAST THAMES GROUP LIMITED
10
East Thames Group LimitedNotes to the financial statements31 March 2005
1. Accounting policies
(a) Basis of accountingThe financial statements of the parent company and the Group are prepared under the historical convention (as amended by the revaluation of the Group’s housing assets) in accordance with the Companies Act 1985, the Housing Act 1996 and comply with Accounting Requirements for Registered Social Landlords General Determination 2000. Applicable accounting standards and statements of recommended practice have been followed.
Basis of consolidationThe Group financial statements consolidate the financial statements of East Thames Group Limited and its operating subsidiaries East Homes Limited, East Choice Limited, East Street Services Limited, East Living Limited and East Potential.
(b) TurnoverTurnover represents rental and service charge income from tenants, management fees, sales of properties developed for other Registered Social Landlords and certain revenue grants.
(c) Housing propertiesHousing properties represent the Group’s investment in properties for rent and properties subject to shared ownership leases.
Completed housing properties held for letting are stated at Existing Use Value for Social Housing (EUV-SH). Shared ownership properties are stated at EUV-SH less the Net Present Liability to repay Social Housing Grant. Housing properties under construction are stated at cost less related SHG and other capital grants.
Cost comprises the cost of acquiring land and buildings, development costs, rehabilitation costs, attributable interest charges incurred during the development period and the capital element of expenditure incurred in respect of the major repair programmes of stock modernisation and estate improvement.
Development and modernisation costs include the capitalisation of the Group’s own directly related employee costs from the direct labour force involved in the development process and directly attributable development management costs and other direct costs. The cost of shared ownership properties is stated net of proceeds of first tranche sales. Land donated by public authorities is brought into cost at market value at the time of donation.
(d) Depreciation of housing propertiesFreehold land is not depreciated. Depreciation is charged so as to write down the value of freehold housing properties other than freehold land to their estimated residual value on a straight line basis over their remaining expected useful economic lives as follows:
Houses 100 to 150 years
Low level flats 100 to 150 years
Blocks over four floors 60 years
These useful economic lives apply equally to the Group’s rented, shared ownership and care stock of housing properties.
(e) Social Housing Grant (SHG)SHG is payable by the Housing Corporation and is utilised to reduce the capital costs of a scheme to a value which may be supported by rental income. Where SHG is received in advance of aggregate expenditure it is disclosed as a short-term creditor.
When the SHG is retained following the disposal of property, it is shown under the disposal proceeds or recycled capital grant funds in creditors. SHG is repayable in certain circumstances. When SHG becomes repayable it is included as a current liability until it is repaid. The repayment of SHG is generally subordinated to the repayment of housing loans, as agreed with the Housing Corporation.
11
( f ) Other grantsOther grants include grants from local authorities and other organisations, primarily the London Docklands Development Corporation. Capital grants are treated in the same way as SHG and include amounts attributable to land donated by public authorities. Grants in respect of revenue expenditure are included in the income and expenditure account in the same period as the expenditure to which they relate.
(g) StockStock is valued at the lower of cost and net realisable value.
(h) Other tangible fixed assetsService charge assets and other fixed assets, such as office buildings, are stated at cost less depreciation. Depreciation is provided evenly on the cost of service charge assets and other tangible fixed assets to write them down to their estimated residual values over their expected useful lives on a straight line basis at the following rates:
Freehold offices 4.0%
Lifts 4.0%
Office furniture and improvements 14.3%
Service equipment 20.0%
Motor vehicles 25.0%
Computer equipment 33.3%
Major software 10.0%
( i ) PensionsThe Group participates in the Social Housing Pension Scheme final salary pension scheme and retirement benefits to Group employees are funded by contributions from all participating employers and employees in the scheme. Payments are made to a fund operated by the Pensions Trust, an independent trust providing superannuation benefits for employees of voluntary organisations. These payments are made in accordance with periodic calculations by consulting actuaries and are based on pension costs applicable across the various participating associations taken as a whole.
( j ) Agency managed hostelsThe Group has brought into its financial statements only income and expenditure under its direct control in respect of agency managed hostels.
(k) TaxationEast Thames Group Limited is a registered charity and is registered under the 1985 Companies Act and is not generally subject to corporation tax.
( l ) HomebuyA subsidiary of the group, East Choice Limited participates in the Homebuy scheme. Purchasers are given a grant of 25% of the value of their home by the company which is in turn reimbursed by the Housing Corporation by way of SHG. No rent is payable to the company. The company receives an allowance for handling the transaction, paid by way of further grant.
East Thames Group LimitedNotes to the financial statements31 March 2005
1. Accounting policies (continued)
12
East Thames Group LimitedNotes to the financial statements31 March 2005
2. Particulars of turnover, cost of sales, operating costs and operating surplus
GROUPTurnover
£’000
Operating costs
£’000
2005Operating
surplus/(deficit)
£’000
2004Operating
surplus/(deficit)
£’000
Income and expenditure from lettings
Housing accommodation 34,867 18,317 16,550 12,376
Special needs accommodation 14,875 12,233 2,642 2,619
Temporary social housing 16,709 15,671 1,038 949
Shared ownership accommodation 4,620 2,460 2,160 1,521
71,071 48,681 22,390 17,465
Other income and expenditure
Regeneration and development services 377 414 (37) (505)
Grants received 123 - 123 -
Other 1,013 13,926 (12,913) (6,405)
1,513 14,340 (12,827) (6,910)
Total 72,584 63,021 9,563 10,555
PARENT
Other income and expenditure
Regeneration and development services 377 413 (36) (505)
Grant from subsidiary 123 - 123 -
Group recharge 9,644 11,407 (1,763) 1,074
Other 2,283 45 2,238 281
Total 12,427 11,865 562 850
13
East Thames Group LimitedNotes to the financial statements31 March 2005
3. Particulars of income and expenditure from lettings
Care and SupportedHousing
HousingAccommodation
SupportedHousing
ResidentialCare Homes
TemporarySocial
HousingShared
Ownership2005
£’0002004
£’000
Income from lettings
Rent receivable net of identifiable service charges 28,232 1,935 334 16,027 2,978 49,506 45,528
Service charges receivable 1,485 4,138 - - 626 6,249 6,971
Gross rents receivable 29,717 6,073 334 16,027 3,604 55,755 52,499
Less: Rent losses from voids (567) (288) (25) (715) - (1,595) (1,320)
Net rents receivable 29,150 5,785 309 15,312 3,604 54,160 51,179
Revenue grants from local authorities and other agencies 4,193 1,439 4,927 - - 10,559 8,081
Support Charges - Fixed contract - 1,563 162 - - 1,725 1,185
Other grants 911 - - - - 911 -
Other income 613 690 - 1,397 1,016 3,716 3,313
Total income from lettings 34,867 9,477 5,398 16,709 4,620 71,071 63,758
Expenditure on letting activities
Services 1,465 793 360 - 291 2,909 3,083
Management 6,726 4,471 4,155 14,619 454 30,425 28,146
Overhead Allocation - 726 1,038 - - 1,764 1,794
Routine maintenance 4,983 549 90 792 578 6,992 6,492
Planned maintenance 2,719 - - - - 2,719 2,393
Rent losses from bad debts 317 (51) (2) 260 - 524 641
Revenue element of major repairs expenditure 1,107 - - - - 1,107 1,078
Housing propertiesdepreciation 1,000 - - - - 1,000 523
Other costs - - 104 - 1,137 1,241 2,143
Total expenditure on lettings 18,317 6,488 5,745 15,671 2,460 48,681 46,293
Operating Surplus on letting activities 16,550 2,989 (347) 1,038 2,160 22,390 17,465
14
East Thames Group LimitedNotes to the financial statements31 March 2005
4. Surplus on property sales
GROUP SalesProceeds
£’000
Costof Sales
£’000
2005Surplus£’000
2004Surplus£’000
Sales of older properties 8,629 4,358 4,271 6,157
Homebuy 1,072 758 314 253
Sales of properties developed for sale 24,341 24,341 - -
34,042 29,457 4,585 6,410
5. Units of accommodation in management
GROUPSelf-contained rental stock Hostels and
Shared HousingManaged for others
Total
Managedby EastThames
Managedby others
SupportedHousing
Stock
Managedby EastThames
Managedby others
Self-contained
units
Hostels/Shared
HousingBedspaces
TemporarySocial
HousingShared
Ownership
1 April 2004 11,190 6,820 432 227 489 119 95 90 1,497 1,421
31 March 2005 11,301 7,114 392 159 180 265 291 21 1,376 1,503
15
East Thames Group LimitedNotes to the financial statements31 March 2005
6. Operating surplus
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
This is arrived at after charging:
Depreciation of housing properties 1,000 523 - -
Depreciation of other fixed assets 946 657 462 -
Profit or Loss on sale of other fixed assets 31 - - -
Operating leases land and buildings 13,582 12,258 - -
Auditors’ remuneration:
- for audit services 63 59 9 12
- for non-audit services 20 8 - -
7. Net interest payable and similar charges
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Interest receivable 169 202 - 69
Interest payable on loans and leases:
- repayable wholly within five years - - - -
- repayable in more than five years (10,615) (9,091) - -
(10,446) (8,889) - 69
Interest payable capitalised on housing properties under construction 1,548 151 - -
Interest receivable transferred to the capital grant recycling fund (552) (99) - -
(9,450) (8,837) - 69
16
East Thames Group LimitedNotes to the financial statements31 March 2005
8. Employees
Group2005
No.
Group2004
No.
Parent2005
No.
Parent2004
No.
Average number of employees:
Administration 446 415 154 128
Care Staff 317 275 - -
Wardens, caretakers, cleaners 6 7 - -
Direct labour 52 49 - -
823 746 154 128
Number of employees expressed in full time equivalents:
Administration 446 404 151 124
Care Staff 313 263 - -
Wardens, caretakers, cleaners 3 6 - -
Direct labour 52 49 - -
873 722 151 124
Staff costs:
Wages and salaries 21,491 16,758 5,269 3,536
Social Security costs 1,899 1,510 496 336
Other pension costs 993 819 374 264
24,383 19,087 6,139 4,136
17
East Thames Group LimitedNotes to the financial statements31 March 2005
8. Employees (continued)
The Group participates in the Social Housing Pension Scheme (SHPS). SHPS is multi-employer defined benefit scheme. The Scheme is funded and is contracted out of the state scheme.
The last formal valuation of the Scheme was performed at 30 September 2002 by a professionally qualified actuary using the “projected unit credit” method. The market value of the Scheme’s assets at the last valuation date was £650 million.
The Group paid contributions at the rate of 11.7% during the accounting period. Member contributions vary between 3.1% and 6.1% depending on their age at the date of joining the Scheme.
It is not possible to identify the share of underlying assets and liabilities belonging to individual participating employers.
Due to the nature of the scheme, the income and expenditure account charge for the period under both SSAP 21 and FRS 17 represents the employer contribution payable.
Financial assumptionsThe financial assumptions underlying the valuation were as follows:
% per annum Rate of return on
future contributions 6.6
Rate of return on accumulated assets 7.2
Rate of salary increases 4.5
Rate of pension increases 2.5
Rate of price inflation 2.5
The accumulated assets of the Scheme were assumed to earn the same return as if they had been invested in a portfolio comprising 100% UK equities for non-pensioner liabilities and 25% UK equities/75% gilts for pensioner liabilities.
The valuation revealed a shortfall of assets compared with the value of liabilities of some £117 million (equivalent to a past service funding level of 85%). The long term joint contribution rate required from employers and members to meet the cost of future benefit accrual was assessed as 15% of pensionable salaries.
Following consideration of the results of actuarial valuation, with effect from 1 April 2004 most employers (including East Thames Group) are required to contribute at the standard rate of 11.7% of pensionable salaries. Member contributions will also be increased by 1.1% from 2.0%-5.0% to 3.1-6.1% of pensionable salaries depending on age. Employers that participate in the Scheme on a non-contributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). This rate will increase from 15.0% to 17.3% of pensionable salaries with effect from 1 April 2004. Employers that have closed the Scheme to new members are required to pay an additional employer contribution loading of 3% to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to the standard 11.7% to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into the SHPS Scheme.
If the valuation assumptions are borne out in practice this pattern of contributions should be sufficient to eliminate the past service deficit by 31 March 2017.
The next valuation is due at 30 September 2005.
18
East Thames Group LimitedNotes to the financial statements31 March 2005
9. Directors, members and senior staff emoluments
BasicSalary
£
BenefitsIn Kind
£
PensionContributions
£
Parent Total
2005£
ParentTotal
2004£
The aggregate amount of emoluments paid to the directors was 611,684 1,196 51,405 664,285 519,116
Emoluments of the Chief Executive, who was also the highest paid director, excluding pension contributions. 116,614 1,196 - 117,810 103,081
The Directors of the parent company as defined under the Accounting Requirements for Registered Social Landlords General Determination 2000 are
its Management Board, the Chief Executive and any other person who is a member of the senior management team.
The Chief Executive is an ordinary member of the pension scheme and has no enhanced or special terms and does not have an individual pension arrangement to which East Thames Group or any of its subsidiaries makes a contribution.
Expenses paid during the year to members of the Board amount to £38,804 (2004: £24,786). No payments of benefits other than those permitted, were made to the persons referred to in Part 1, Schedule 1 of the Housing Act 1996.
19
East Thames Group LimitedNotes to the financial statements31 March 2005
10. Tangible fixed assets - Housing properties
Housingproperties
held forletting£’000
Housingproperties
underconstruction
£’000
Shared ownership properties
held for letting
£’000
Shared ownership properties
under construction
£’000 Total
£’000
Valuation
As at 1 April 2004 320,064 26,603 58,958 37,763 443,388
Additions 3,922 20,731 1,347 33,983 59,983
Interest capitalised 109 328 40 1,071 1,548
Schemes completed 12,514 (12,514) 23,819 (23,819) -
Disposals (818) - (20,249) - (21,067)
Valuation adjustment (3,732) - 8,110 - 4,378
At 31 March 2005 332,059 35,148 72,025 48,998 488,230
Depreciation and impairment
As at 1 April 2004 - - - - -
Depreciation charged in year 1,000 - - - 1,000
Impairment charged in year - - - - -
Depreciation released on disposals - - - - -
Valuation adjustment (1,000) - - - (1,000)
At 31 March 2005 - - - - -
Social Housing and other grants
As at 1 April 2004 - 24,713 - 15,036 39,749
Additions 2,172 11,374 529 2,096 16,171
Schemes completed 6,064 (6,064) 4,868 (4,868) -
Disposals (526) - (915) - (1,441)
Valuation adjustment (7,710) - (4,482) - (12,192)
At 31 March 2005 - 30,023 - 12,264 42,287
Net book value
At 31 March 2005 332,059 5,125 72,025 36,734 445,943
At 31 March 2004 320,064 1,890 58,958 22,727 403,639
20
East Thames Group LimitedNotes to the financial statements31 March 2005
10. Tangible fixed assets - Housing properties (continued)
2005£’000
2004£’000
Total accumulated capital and revenue social grant receivable
Capital grants 387,493 372,977
Revenue grants - -
387,493 372,977
Housing properties comprise:
Freehold land and buildings 445,868 403,176
Long leasehold land and buildings 355 463
446,223 403,639
Completed housing properties held for letting are stated at Existing Use Value for Social Housing (EUV-SH) and shared ownership properties are stated at EUV-SH less the Net Present Liability to repay Social Housing Grant. Housing properties have been valued by professional valuers, FPD Savills, Chartered Surveyors.
The desktop valuation of completed housing properties was prepared as at 31 March 2005 in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. This has resulted in a positive valuation adjustment as follows:
£’000
Completed properties at valuation
East Homes Limited 332,059
East Choice Limited 72,045
404,104
Housing properties under construction at cost
East Homes Limited 35,148
East Choice Limited 48,998
84,146
21
In the valuing of housing properties, discounted cash flow methodology was adopted and key assumptions included:
Discount rate 6.0%
Annual inflation rate 2.5%
Level of annual rent increase 0.5%
The carrying value of the housing properties that would have been in the financial statements had the assets been carried forward at historical costs less SHG and depreciation is as follows:
East Thames Group LimitedNotes to the financial statements31 March 2005
10. Tangible fixed assets - Housing properties (continued)
2005£’000
2004£’000
Historical cost 680,245 639,664
Social Housing Grant (389,386) (372,977)
Other capital grants (49,888) (51,567)
Depreciation and impairment (4,362) (3,617)
236,609 211,503
Investment in Homebuy:
Long term investment in properties (Homebuy) 39,498 37,931
Less grants received (39,498) (37,931)
Grants recycled 732 722
Decrease in investment in properties (732) (722)
- -
22
East Thames Group LimitedNotes to the financial statements31 March 2005
11. Tangible fixed assets - Other
Freehold Office£’000
Plant,equipment
and furniture
£’000
Motorvehicles
£’000Total
£’000
GROUP
Cost
At 1 April 2004 9,475 5,550 275 15,300
Additions 703 3,472 31 4,206
Disposals (76) (323) (174) (573)
At 31 March 2005 10,102 8,699 132 18,933
Depreciation
At 1 April 2004 (2,722) (3,837) (226) (6,785)
Charged in year (352) (563) (31) (946)
Disposals 72 295 140 507
At 31 March 2005 (3,002) (4,105) (117) (7,224)
Net book value
At 31 March 2005 7,100 4,594 15 11,709
At 31 March 2004 6,753 1,713 49 8,515
PARENT
Cost
At 1 April 2004 - 741 - 741
Additions 1,319 2,078 - 3,397
Disposals - - - -
At 31 March 2005 1,319 2,819 - 4,138
Depreciation
At 1 April 2004 - - - -
Charged in year - (462) - (462)
Disposals - - - -
At 31 March 2005 - (462) - (462)
Net book value
At 31 March 2005 1,319 2,357 - 3,676
At 31 March 2004 - 741 - 741
23
12. Investments
East Homes Limited, formerly known as East Thames Housing Association Limited, together with three other registered social landlords and the London Borough of Newham has invested in Passmore Urban Renewal Limited. This Industrial and Provident Society has been set up for the promotion of urban regeneration in the London Borough of Newham. At 31 March 2002, East Homes Limited had invested £450,000 in this project.
The parent company owns one £1 nominal share in East Choice Limited, formerly known as Boleyn and Forest Housing Society Limited, whose main activity is developing and managing shared ownership schemes. The parent company has entered into trust arrangements with the members of East Choice Limited which require it to classify it as a subsidiary. East Choice Limited is a Registered Social Landlord with charitable status, registered with the Housing Corporation.
The parent company has a 100% shareholding in East Street Limited, formerly known as Boleyn and Forest Commercial Services Limited, whose main activity is to undertake property management services for other associations and to deal with other non-charitable housing activities.
The parent company owns one £1 nominal share in East Living Limited, formerly known as East Thames Care Limited whose main activity is providing care and housing management for supported housing and residential care homes. The parent company has entered into trust arrangements with the members of East Living Limited which require it to classify it as a subsidiary.
The parent company has entered into trust arrangements with the members of East Potential, formerly known as Network East Foyers which require it to classify it as a subsidiary. The principal activity of East Potential is the provision of housing management services at Stratford (Focus E15), Harlow, Redbridge and Tower Hamlets (Drapers City) foyers, First Step Assessment Centre and related training and information services to young people in east London and Harlow.
East Thames Group LimitedNotes to the financial statements31 March 2005
2005£’000
2004£’000
Passmore Urban Renewal Limited 450 450
Fixed term Treasury Deposit 1,274 4,058
Total 1,724 4,508
24
13. Stock and work in progress
East Thames Group LimitedNotes to the financial statements31 March 2005
Group2005
£’000
Group2004
£’000
Completed properties for sale to other Registered Social Landlords 8,385 7,968
Properties for sale to other Registered Social Landlords under construction – net of SHG 3,024 (550)
11,409 7,418
14. Debtors
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Due within one year:
Arrears of rent and service charges 3,672 3,981 - -
Less: Provision for bad and doubtful debts (1,827) (2,291) - -
1,845 1,690 - -
Other debtors 4,495 5,200 497 160
Prepayments and accrued income 1,465 2,198 184 -
Amounts due from group companies (net of provisions ) - - 6,739 866
7,805 9,088 7,420 1,026
15. Cash at bank and in hand
Included in cash at bank and in hand are amounts totalling:
2005 - Group: £200,000 (Parent Company: £Nil)
2004 - Group: £200,000 (Parent Company: £Nil)
which are subject to restrictions and are not freely available for general use.
25
16. Creditors: Amounts falling due within one year
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Loans (note 18) 13,546 1,590 - -
Bank overdraft 3,142 - 3,142 -
Rent and service charges received in advance 1,272 1,121 - -
Corporation Tax - - - -
Other taxation and social security 396 478 (75) 122
Accruals and deferred income 4,352 6,894 789 197
Other creditors 12,440 16,331 4,296 48
Capital Grant Recycling Fund 3,997 916 - -
Disposal Proceeds Fund 1,100 455 - -
40,245 27,785 8,152 367
Group2005
Group2004
Payments to creditors
Average number of days between receipt and payment of purchase invoices 13 13
East Thames Group LimitedNotes to the financial statements31 March 2005
17. Creditors: Amounts falling due after more than one year
Group2005
£’000
Group2004
£’000
Loans (note 18) 167,361 153,734
Deferred income 1,344 1,402
Capital Grant Recycling Fund 6,148 7,141
Disposal Proceeds Fund 1,213 1,393
Other 1,529 1,109
177,595 164,779
The deferred income represents the premium on the HACO loan, net of issue costs. This premium will be amortised over the period of the loan.
26
18. Loan analysis
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Due within one year:
Bank overdraft 3,142 - 3,142 -
Bank loans 908 1,246 - -
Orchardbrook Limited (originally the Housing Corporation) loans
29 22 - -
Other loans 12,609 322 - -
16,688 1,590 3,142 -
Due after more than one year:
Bank loans 114,717 100,397 - -
Orchardbrook Limited (originally the Housing Corporation) loans 5,839 5,864 - -
HACO 25,000 25,000 - -
Other loans 22,281 22,914 - -
Capitalised costs (476) (441) - -
167,361 153,734 - -
Loans are repayable as follows:
Within one year 16,688 1,590 - -
Between one and two years 1,603 1,553 - -
Between two and five years 19,161 36,651 - -
After more than five years 146,597 115,530 - -
184,049 155,324 - -
East Thames Group LimitedNotes to the financial statements31 March 2005
Loans and finance leases to the value of £181 million (Parent Company: £Nil) are secured by a combination of fixed and floating charges on individual properties.
The loans from Orchardbrook Limited are repaid in half-yearly instalments over the estimated life of the scheme on which the loan is secured, at fixed rates of interest ranging from 9.50% to 10.625%. The final instalments are due for repayment in the period 2005 to 2037. The final instalments
on bank, HACO and other loans are due for repayment in the period 2006 to 2029.
Out of the total of loans and finance leases of £181 million (Parent Company: £Nil) interest is payable at fixed rates varying from 5.05% to 16.5% on £124 million (Parent Company: £Nil) and at rates linked to LIBOR on the remaining £57 million (Parent Company: £Nil). Of the floating rate £20 million is hedged to reduce the exposure to interest rate movement.
27
19. Annual obligations under operating leases
East Thames Group LimitedNotes to the financial statements31 March 2005
Group2005
£’000
Group2004
£’000
Operating leases on land and buildings which expire:
Within one year 4,184 643
In the second to fifth years inclusive 7,301 10,424
Over five years 1,638 1,869
20. Provision for liabilities and charges
GroupDilapidation
Repair2005
£’000
GroupDilapidation
Repair2004
£’000
At 1 April 2004 and 31 March 2005 100 100
21. Non-equity share capital
2005£’000
2004£’000
Shares of £1 each issued and fully paid:
At 1 April 2004 49 49
Shares issued during the year - -
Shares surrendered during the year - -
At 31 March 2005 49 49
The shares provide members with the right to vote at general meeting, but do not provide any rights to dividends or distributions on winding up.
28
22. Reserves
Revaluation£’000
Restricted£’000
Designated£’000
Consolidated£’000
Revenue£’000
Total£’000
GROUP
At 1 April 2004 192,136 2,912 1,953 263 45,516 242,780
Surplus for the year - - - - 4,698 4,698
Property revaluation adjustment 17,570 - - - - 17,570
Transfers (372) (1,121) 1,538 - (45) -
At 31 March 2005 209,334 1,791 3,491 263 50,169 265,048
Restricted£’000
Designated£’000
Revenue£’000
Total£’000
PARENT
At 1 April 2004 - 1,702 680 2,382
Surplus for the year - - 562 562
Transfers 1,750 (1,221) (529) -
At 31 March 2005 1,750 481 713 2,944
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Restricted reserves comprise: -
Donations 41 200 - -
Giftaid from East Choice Limited to Parent 1,750 - 1,750 -Reinvestment fund - transferred to designated reserves - 2,712 - -
1,791 2,912 1,750 -
Designated reserves comprise:
Major repairs new funded schemes 2,066 218 - -
RCGF & DPF 911 - - -
Giftaid from East Choice Limited to Parent 514 1,735 481 1,702
3,491 1,953 481 1,702
East Thames Group LimitedNotes to the financial statements31 March 2005
The Group plans its financial affairs to ensure that each year revenue income exceeds revenue expenditure. This policy ensures that the Group has a margin of safety to manage unexpected expenditure or shortfalls in income. The annual surpluses ensure that East Thames Group Limited is able to meet its commitment to providers of
private finance and continue to provide social housing. Unlike commercial organisations the Group’s rules prevent the distribution of reserves. Instead, these are applied to furthering our aims and objectives. At 31 March 2005 the Group’s reserves were all used in financing investments in social housing.
29
23. Financial commitments
Group2005
£’000
Group2004
£’000
Capital commitments
Expenditure contracted for but not provided in the accounts 50,649 93,455
Expenditure authorised by the Board but not contracted for 12,515 52,100
63,164 145,555
East Thames Group LimitedNotes to the financial statements31 March 2005
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Operating surplus before taxation 14,149 16,966 933 850
Depreciation of fixed assets 1,946 1,180 462 -
On sale of other fixed assets 31 442 - -
On sale of housing properties (4,585) (6,410) - -
Net increase/(decrease) in provisions (522) (54) - -
11,019 12,124 1,395 850
Movement in Working Capital
(Increase)/decrease in stock (3,991) 6,891 - -
(Increase)/decrease in debtors 1,101 (2,457) (6,394) 919
Increase/(decrease) in creditors (3,157) 10,470 4,643 (82)
Net cash inflow from operating activities 4,972 27,028 (356) 1,687
24. Reconciliation of operating surplus to operating cash flows
30
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
(Decrease)/Increase in cash in the period (1,018) (728) (4,124) 982
Cash inflow from increase in debt and lease financing (25,583) 12,008 - -
Change in net debt resulting from cash flows (26,601) 11,280 (4,124) 982
Net debt at the start of the period (153,047) (164,327) 982 -
Net debt at the end of the period (179,648) (153,047) (3,142) 982
25. Reconciliation of net cash flow to movement in net debt
East Thames Group LimitedNotes to the financial statements31 March 2005
Group2005
£’000
Group2004
£’000
Parent2005
£’000
Parent2004
£’000
Cash at bank and in hand 4,398 2,275 - 982
Bank overdraft (3,142) - (3,142) -
Loans due within one year (13,546) (1,590) - -
Loans due after more than one year (167,359) (153,732) - -
(179,648) (153,047) (3,142) 982
26. Analysis of net debt
31
iii
Our valuesWe will be customer focused• responding to what our customers say• providing excellent and reliable services• enabling customer choice
We will be ambitious• creating new approaches to service delivery• producing excellent outcomes• striving for excellence in everything we do
We will be professional• being straightforward in everything we do• adopting a flexible approach
to delivering services• demonstrating a respectful approach
to our customers• being open, reliable and consistent
We will be leaders• empowering our staff to act responsibly• showing creativity in service provision• inspiring those who work with us• campaigning on key issues
Our missionTo make a positive and lasting contribution to the neighbourhoods in which we work.
Our key aims1 Providing high-quality homes and services
that meet the needs of our customers.
2 Ensuring that our customers can influence our services.
3 Influencing local, regional and national thinking, policies and strategies.
4 Developing well informed, committed and enthusiastic staff.
5 Actively using our financial and organisational strength.
Mission, Aims and Values
iv
Registered Office3 Tramway AvenueStratfordLondon E15 4PN
Switchboard: 020 8522 2000Fax: 020 8522 2001ConnectDirect: 0845 600 0830Minicom: 020 8522 2006www.east-thames.co.ukRegistered by the Housing Corporation, No. LH4309Registered under the Companies Act 1985, No. 4091100Registered charity 1084952Member of the National Housing Federation
Designed by Hoop Associates www.thisishoop.com