group accounts 2008

Financial statements for the year ended 31 March 2008

Board members, senior staff, auditors and bankers Report of the Board Statement of responsibilities of the Board Operating and financial review Independent Auditors’ report to the Members of East Thames Group Limited Consolidated income and expenditure account Consolidated statement of total recognised surpluses and deficits Consolidated balance sheet Consolidated cash flow statement Parent income and expenditure account Parent balance sheet Parent cash flow statement Notes to the financial statements

1 2 5 6

14 16

17 18 19 20 21 22 23

Contents

East Thames Group Limited Financial Statements 1

EAST THAMES GROUP LIMITED BOARD MEMBERS, SENIOR STAFF, AUDITORS AND BANKERS

Board

Chairman Dr R. Chilton OBE

Vice Chair Mr O. Olanrewaju (appointed Vice Chair April 2007)

Treasurer Mr C.Villiers (retired September 2007)

Mr A. Newell (appointed April 2007, appointed Treasurer from September 2007)

Other Members Mr B. Robertson (resigned October 2007)

Mr J. Norman

Mr D. Edwards

Mr D. Goodman

Mrs L. Perham

Ms J. Holmes (appointed April 2007)

Ms D. Sorkin (appointed April 2007)

Mr C. Ofili (appointed April 2007)

Senior Staff

Group Chief Executive Ms J. Barnes

Deputy Chief Executive Mr M. Heys (to December 2007)

Group Director of Development Mr G. Pearce

Group Director of Corporate Services Ms D. Boakye

Group Director of Business Services Ms J. Kutner (to November 2007)

Group Company Secretary Mr H. Potter

Registered Office 29-35 West Ham Lane

Stratford

London E15 4PH

Auditors Grant Thornton UK LLP

Byron House

Cambridge Business Park

Cowley Road

Cambridge CB4 0WZ

Bankers Barclays Bank plc

Level 28

1 Churchill Place

Canary Wharf

London E14 5HP

Registered Charity 1084952

Registered under the Companies Act 1985 4091100

Registered by the Housing Corporation No. LH 4309

2 East Thames Group Limited Financial Statements

EAST THAMES GROUP LIMITED REPORT OF THE BOARD

The Board presents its report and audited financial

statements for the year ended 31 March 2008.

Details of the Group’s principal activities, performance

for the year and a summary of the financial results are

presented in the Operating and Financial Review that

follows this board report.

Going concern

The Board has a reasonable expectation that the Group

has adequate resources to continue in operational

existence for the foreseeable future, being a period of

12 months after the date on which the report and

financial statements are signed. For this reason, it

continues to adopt the going concern basis in the

financial statements.

Accounting principles

These accounts have been compiled in accordance

with the Statement of Recommended Practice:

“Accounting by Registered Social Landlords” (Update

2005); the Accounting Requirements for Registered

Social Landlords General Determination (2006);

United Kingdom Generally Accepted Accounting

Practice and the requirements of the Companies Act

(1985). The property valuations have been presented

at Existing Use Value for Social Housing (EUV-SH).

Accounting policies that are specific to East Thames

Group Limited are set out in Note 1 (page 23) of the


Employee involvement

One of our strengths is the quality of all our employees;

it is the key factor in our ability to meet our objectives

and commitments to residents and service users in an

effective and efficient manner. We continue to consult

and keep employees informed on matters affecting

them, and on the progress of the Group. We do this

in a number of ways including a formal forum for

consultation, departmental meetings and a variety of

newsletters and intranet pages.

Disabled employees

We give full and fair consideration to applications for

employment from disabled persons for all vacancies.

Should an employee become disabled, we make every

effort to retain them in order that their employment within

the Group may continue. It is Group policy to make

training, career development and promotion opportunities

available to all employees.

Tenant involvement

We actively encourage tenants’ involvement in decision

making. We encourage tenant Board members and

have clear reporting arrangements between tenant

groups and the Board.

Complaints

A clear complaints policy is issued to all service

users. This has been streamlined and Housing and

Neighbourhood Management believe that the revised

procedure should deliver greater consistency in complaint

handling and less escalations. The redress and

compensation policy has recently been reviewed and

will offer alternatives to financial compensation. Partner

contractors will be expected to abide by our policies.

Internal control

The Board has overall responsibility for establishing

and maintaining the whole system of internal control

and for reviewing its effectiveness. This applies for 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 processes. This approach includes the

regular evaluation of the nature and extent of risks to

which the Group is exposed and is consistent with

Housing Corporation circular 07/07: 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:


REPORT OF THE BOARD, continued

Identification and evaluation of key risks

Management responsibility has been clearly defined for

the identification, evaluation and control of significant

risks.

The Group has an overall Risk Management Strategy

which is reviewed annually and produces Group and

individual subsidiary risk maps which identify key risks

linked to our Strategic Plan. These risks are scored in

terms of impact (including reputational image) and

probability both in terms of the initial risk and the

residual risk once adequate control measures are in

place. We have undergone a major transformational

change programme internally during the course of the

year which has seen major changes to the executive

staff structure. Changes to our approach to monitoring

risk have been agreed as a result of these changes and

will be implemented during 2008-09.

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 quarterly reporting

framework to the Group Risk Management and Audit

Committee/Boards which review changes to the risk

map on an on-going basis.

The Group Executive and Officer Risk Management

Panel regularly consider reports on significant risks

facing the Group. The Group Chief Executive/relevant

Managing Director are responsible for reporting to the

respective Board(s) any significant changes affecting

key risks.

Monitoring and corrective action

A 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 procedures

The 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 2004 Code of Governance

– Competence and Accountability. Adherence to the code

has been reviewed to ensure that the Group continues to

comply and is at the forefront of best practice. It is used

as a basis for the Group’s policies with regard to quality,

integrity and ethics and 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.

Information and financial reporting systems

Financial 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 reviews key performance indicators

to assess progress towards the achievement of key

business objectives, targets and outcomes. As part of

our current change programme, a Chief Executive

Support Unit has been established which will co-

ordinate our approach to performance management and

to measuring the critical success factors of the business.

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 Risk Management

and Audit Committee. The Group Risk Management

and Audit Committee considers internal control and risk

regularly during the year.

Fraud

The Board has established a fraud policy which covers

the prevention, detection and reporting of fraud along

with the recovery of assets. The Group operates a zero

tolerance policy in relation to theft and fraud and reports

all such confirmed instances to the relevant authorities.

The Fraud Register is reviewed on an on-going basis

through the Group’s Group Risk Management and

Audit Committee and annually by the Board.


REPORT OF THE BOARD, continued

During the course of the year one incident of suspected

fraud was reported to the Housing Corporation but was

not investigated further by the Metropolitan Police. The

incident involved a potential property sale to the Group;

an assessment was made and it was found that no

material loss was incurred by the Group.

Instances of theft against the organisation and/or

residents have occurred during the course of the year

and have been fully investigated and reported to the

police as appropriate. There has not been any

discernable increase in the level of such incidents

during the year.

Regulatory intervention

There has been no regulatory intervention by the

Housing Corporation during the course of the year and

the Group continues to maintain its ‘green light’ status

in the ‘Housing Corporation Assessment’ around

governance, financial viability, management and

development.

Sources of assurance

There are a number of internal and external sources of

assurance which have been used in compiling this

statement some of which have been mentioned above.

In summary these sources are:

• strong management structures and clear accountability;

• Board/Group Risk Management and Audit Committee

oversight of the organisation’s business;

• management assurances;

• management reports on operational and financial

matters;

• management reports on operational and financial

controls;

• risk management activity;

• control and risk self assessment;

• internal and external audit;

• key performance indicators linked to business plans;

• quality management systems such as Investors in

People;

• regulatory reports

The Board has received the Group Chief Executive’s

annual report, which has been endorsed by the Group

Executive, 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.

Auditors

We are currently reviewing tenders for the provision of

audit services. A resolution to appoint the successful

tenderer for the auditors of the Group is to be proposed

at the forthcoming Annual General Meeting. The

auditors of the 2007-08 accounts are Grant Thornton

UK LLP.

At the date of making this report, the members and

directors, as set out on page 1, confirm the following:

• so far as each member and director is aware, there is

no relevant information needed by the Group’s auditors

in connection with preparing their report of which the

Group’s auditors are unaware, and

• each member and director has taken all the steps that

they ought to have taken as a member or director in

order to make themselves aware of any relevant

information needed by the Group’s auditors in

connection with preparing their report and to establish

that the Group’s auditors are aware of that information.

The Report of the Board was approved by the Board on

Friday, 18 July 2008, and signed on its behalf by:

Henry Potter – Group Company Secretary


EAST THAMES GROUP LIMITED STATEMENT OF THE RESPONSIBILITIES OF THE BOARD FOR THE REPORT AND FINANCIAL STATEMENTS

The Board is responsible for preparing the report and

financial statements in accordance with applicable law

and United Kingdom Generally Accepted Accounting

Practice.

The Companies Act (1985) and registered social

landlord legislation in the United Kingdom 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 the company at the end of the

year and of the surplus or deficit of the Group and the

company for the year then ended.

In preparing those financial statements, the Board is

required to:

• select suitable accounting policies and apply them

consistently;

• make judgements and estimates that are reasonable

and prudent; and

• follow applicable United Kingdom Accounting

Standards and the Statement of Recommended

Practice: “Accounting by Registered Social Landlords”

(Update 2005), subject to any material departures

disclosed and explained in the financial statements.

The Board is responsible for keeping proper accounting

records which disclose with reasonable accuracy at any

time the financial position of the Group and the company

and enable it to ensure that the financial statements

comply with the Companies Acts (1985), paragraph 16

of Schedule 1 to the Housing Act (1996) and the

Accounting Requirements for Registered Social

Landlords General Determination 2006. It is also

responsible for safeguarding the assets of the Group

and the company and hence for taking reasonable

steps for the prevention and detection of fraud and

other irregularities.

The Board is responsible for insuring that the Report of

the Board is prepared in accordance with the Statement

of Recommended Practice: “Accounting by Registered

Social Landlords” (Update 2005).

The Board is responsible for the maintenance and

integrity of the corporate and financial information on

the Group’s website. Legislation in the United Kingdom

governing the preparation and dissemination of the

financial statements and other information included

in annual reports may differ from legislation in other

jurisdictions.


EAST THAMES GROUP LIMITED OPERATING AND FINANCIAL REVIEW

Principal activities and legal status

The Group is a Registered Social Landlord under the

Housing Act (1996) and a registered charity under the

Companies Act (1985). Its principal activities are the

provision of central services to its operating subsidiaries,

development of social housing and asset management.

The Group and its subsidiaries work in the London

boroughs of Newham, Tower Hamlets, Redbridge,

Waltham Forest, Barking and Dagenham and Havering,

and in Essex. All the subsidiaries are wholly owned by

East Thames Housing Group.

The three main operational subsidiaries are:

• East Homes Limited – a Registered Social Landlord

and a charitable Industrial and Provident Society that

provides social housing including low-cost home

ownership;

• East Living Limited – a charitable Industrial and

Provident Society that provides care and supported

housing;

• East Potential – a registered charity that manages

foyers and neighbourhood regeneration programmes

on behalf of the Group.

There are five other subsidiaries that provide specialist

and support services:

• East Foundation Limited – a registered charity that

funds projects to help build sustainable communities;

• East Regen Limited – a non-charitable company that

provides management and development services;

• East Place Limited – a non-charitable company that

undertakes commercial activities. Following a transfer

of shares on the 8th October 2007 from East Thames

Group Limited, East Place Limited (formerly East

Street Limited) became a subsidiary of East Homes

Limited;

• East Treasury Limited – a non-charitable company

that raises finance and provides treasury services;

• EH Street Properties Limited – a non-charitable

company acquired in March 2008 as a subsidiary of

East Homes Limited. We have transferred the

properties to East Homes Limited and will wind up this

company in 2008-09.

Performance, development and continuous

improvement

We are a major developer of new affordable housing,

and are one of the Associations selected by the Housing

Corporation as development partners.

We are proud to have been selected by the Olympic

Delivery Authority and London & Continental Railways

alongside Lend Lease and First Base as the Preferred

Development Partner for zones 2–7 of Stratford City –

a remit which includes the Athletes’ Village.

Our most recent Housing Corporation review gave us a

full set of green lights.

The Group Board and Group Executive receive

Balanced Scorecard reports at each of their regular

meetings, giving performance statistics across a range

of activities undertaken by the Group, enabling them to

make strategic decisions as trends emerge. The areas

we monitor are regularly reviewed. Highlights for the

year include:

Completed units continue to increase year-on-year,

whilst first tranche sales of shared ownership units

remain broadly static.

2003/04 2004/05 2005/06 2006/07 2007/08

Development and marketing activity

0

100

200

300

400

500

600

700

800

Units completedFirst tranche sales


OPERATING AND FINANCIAL REVIEW, continued

We have exceeded our Supported Housing Grant

allocation every year.

Bringing more homes up to decent homes standard than

anticipated has resulted in this increase in average unit

revenue maintenance costs. At the end of 2007-08 95.2%

of our homes had reached the Decent Homes standard

and we have improved our SAP rating to 68.3 (2007: 65.4).

Current arrears (included within gross arrears), have fallen

over the year to 4.7% as at the end of March, well below

the benchmark of 6.1%.

Development activity picked up towards the end of the

financial year, We completed 747 properties against a

target of 610 exceeding our cash planning target by

£15.9m.

Improvements in rent collection processes resulted in

achieving 100% completion rates by the end of the year.

This performance put the Group in the G15 top quartile.*

Top quartile performance has also been reported in:

• General needs void loss 0.72% against a G15 top

quartile of 0.75%*

• General needs re-let time of 23.4 days against a Housing

Corporation benchmark top quartile of 25.8 days

* The G15 quartile ratings are based on the G15 2006-07

information as the 2007-08 information was not available

at the time of collating this report. The G15 is a group of

registered social landlords within the London region who

meet on a regular basis; benchmarking performance is

one of the activities carried out.

0

£5m

£10m

£15m

£20m

£25m

£30m

£35m

2003/04 2004/05 2005/06 2006/07 2007/08

AllocationClaimed

Supported Housing Grant

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Development and sales activity (units)

0

200

400

600

800

First tranche sales (cumulative)Development startsDevelopment completions

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Rent collection as a % of rent charge (cumulative figures)

85%

90%

95%

100%

2003/04 2004/05 2005/06 2006/07 2007/08

Average maintenance spend/unit

£800

£900

£1,000

£1,100

£1,200

£1,300

£1,400

2003/04 2004/05 2005/06 2006/07 2007/08

Rent statistics

Rent arrears (gross arrears as % of rent and service charges receivable)Rent losses (voids and bad debts as % of rent and service charges receivable)

2%

3%

4%

5%

6%

7%

8%



Strategies

• Find innovative, high-quality solutions to meet specific

customer and housing needs.

• Deliver sustainability.

• Meet the needs of the large and growing child and

youth population.

• Develop a wide range of housing for different lower

income groups.

• Pursue strategic opportunities for growth and stock

transfer across east London and Essex.

Performance in 2007-08

• 95.2% of our general needs properties now meet

Decent Homes standard (March 2007: 84.6%).

• All homes meet the Housing Corporation minimum

standard for the Code for Sustainable Homes.

• A ‘One Stop Shop’ opened for all residents in

March 2008.

• Sustainability statements have been developed for

10 of our largest estates.

• Research has been completed into the barriers for

young black men accessing training and career

opportunities.

• Received a grant of almost £500k from the London

Development Agency to support construction training

opportunities through East Potential.

• Shortlisted for the Housing Corporation’s Gold Award

for Excellence for our work helping people to gain

employment.

• Foyers provided accommodation to 327 people who

were homeless or in housing need.

• The employment, training and education business unit

provided services to 247 socially disengaged young

people. 41% of residents who accessed our education

and employment programme have gained employment

in 2007-08.

* We improved our knowledge about our residents which

will enable us to communicate to them in their

preferred language or format (large print, Braille) and

to develop services that are adapted to their needs.

Objectives and strategies

Our mission is “to make a positive and lasting contribution to the neighbourhoods in which we work”. We have five

key aims underpinning this mission and have identified key actions to ensure that we are able to deliver our promises.

Key aim 1

• To provide high quality homes and services that will

meet the needs of our customers.



Strategies

• Give opportunities to residents to define our service

standards and business priorities, set development

standards for new homes and improvement of existing

homes, and help us make our neighbourhoods a better

place to live.

• Seek feedback from those service users whose voices

are not normally heard.

• Work with strategic and local agencies to help them

achieve their objectives in the neighbourhoods in

which we work.


• 71% (target 51%) of residents reported being satisfied

with their opportunities to participate in defining

service standards.

• Residents were involved in the business planning

process for 2008-09.

• Winner of National Black and New Communities

(NBNC) ‘Engaging Young People’ award for work in

our foyers.

• Our new Customer Promises were developed in

consultation with residents from across the Group.

• Residents are involved in testing and assessing our

services by taking part in estate inspections and

resident mystery shopping.

Strategies

• Communicate effectively so staff understand what we

do, share our future plans and influence issues that

affect our business.

• Develop staff to maximise their skills in an organisation

with a culture of integrity, where they can innovate

using internal and external knowledge and experience.

• Create a workplace culture where staff feel as special

as they make our customers feel.

• Maintain a working environment conducive to attracting

and retaining the highest quality staff.


• Investor in People Standard awarded to the Group.

• Organisation-wide staff workshops on customer

service held in July; managers also attended training

on “Leading for Customer Excellence”.

• Launched five-day induction course for new

employees.

• Ran 320 in-house training courses.

• 82 staff completed professional qualifications.

• Cascaded briefings and held team meetings to ensure

all staff are aware of what is happening in the Group.

• New maintenance partners attended our customer

care course to ensure the highest quality service to our

residents.

Key aim 2

• To ensure that our customers can shape our

services.

Key aim 3

• Developing well-informed, committed and

enthusiastic staff.



Strategies

• Optimise the use of Group assets and revenue

streams to ensure the most effective investment in

the homes and services for our residents and

service users.

• Improve the manner in which we manage risk.

• Exploit the knowledge, skills and experiences across

the Group to deliver our mission.

• Continue to improve business performance and

efficiency.

• Continue to review our governance structures.

• Use our organisational strength to contribute to the

success of the 2012 Olympics and its legacy.


• Efficiency savings of £600k were achieved in the year.

• Senior roles across the business reviewed and

departmental restructures started from the top down.

• Management accounts and detailed KPIs produced

monthly and circulated to the Board and Senior

Managers.

• A single risk map is now in place and an independent

review of this found it to be comprehensive on 317

out of 330 standard sector risks.

Strategies

• Contribute to key local partnerships and planning

forums.

• Target and shape regional and national agendas to

benefit our neighbourhoods.

• Promote innovative solutions using flagship projects,

services and research.

• Develop staff and Board members as ambassadors

for the Group.


• East Potential has worked in partnership with the

Foyer Federation to develop their national ‘Future

Builders’ programme.

• Opened a Young Persons’ One Stop Shop at the

Harlow foyer as a joint venture with Connexions,

Harlow Council, Harlow Health Centres Trust and

others to provide advice on areas of concern to

young people.

• Member of local strategic partnerships such as the

Crime and Disorder Group in Newham.

• Continued to lobby for “Working Future” private sector

leasing model which we have piloted to help homeless

families in private sector rented accommodation

overcome barriers to employment.

• First RSL to be a regional homelessness champion.

Key aim 4

• Actively using our financial and organisational

strength.

Key aim 5

• To influence local, regional and national thinking,

policies and strategies.



Risks and uncertainties

The Group Board and the Group Risk Management and

Audit Committee use a number of internal and external

processes to manage risk:

Risk management activity

During the year the Board considered our

comprehensive Group Risk Management Strategy, a

Group-wide risk map and individual subsidiary risk

maps. The risk maps assess risk based on impact

(including reputational risk) and probability. A system of

measuring residual risk scores is used (i.e. those scores

after controls are in place) and all scores over 100 are

reviewed by the Group Risk Management and Audit

Committee and individual Boards on a quarterly basis.

Officer Risk Management Panel

An Officer Risk Management Panel consider all items of

risk for new activities and for any development schemes

which fall outside the agreed template.

Health, safety and welfare of employees

The Group takes its responsibilities for health and safety

very seriously. It has an established heath and safety

team and a comprehensive training and implementation

programme, overseen by a Health and Safety

Committee. The Committee meets four times a year,

includes senior managers and representatives from

across the Group, and is chaired by the Group

Company Secretary. All staff receive health and safety

training as part of their induction programme.

External Influences

The sector is watching closely to see how the “credit

crunch” will affect the cost of its borrowings, and the

demand for its rental and shared ownership properties.

The Housing and Regeneration Bill, currently passing

through Parliament, is introducing a new housing

regeneration agency and a new regulator. Both of these

are likely to affect our working environment in the future.

The development associated with the Olympic Games,

in which East Thames Group will be a key player

continues to be an important focus for the Group

alongside the broader regeneration of the Lee Valley

and the growth areas of the Thames Valley and M11

corridor.

Future developments

Our new purpose built offices opened in April 2008 in the

heart of Stratford. The offices include bright user friendly

areas for our tenants and other members of the local

community. They are close to the Olympic site and the

new Stratford City complex that we are involved in

developing. It is expected that up to and beyond 2012

the area will see increases in the rental of office space.

By developing our own offices now we will not have this

extra cost in the future.



Financial positionGroup highlights five year summary

for the year ended 31 March 2008 2007 2006 2005 2004

£’000 £’000 £’000 £’000 £’000

Income and expenditure

Turnover 101,704 84,635 81,021 72,584 66,700

Operating costs (95,706) (76,506) (71,447) (63,021) (56,145)

Operating surplus 5,998 8,129 9,574 9,563 10,555

Net interest payable (11,064) (10,040) (9,888) (9,450) (9,937)

Surplus on sale of assets 7,119 8,828 4,357 4,585 6,410

Exceptional items (667) (12,579) (2,340) – –

Tax (21) – – – –

Surplus/(deficit) for the year 1,365 (5,662) 1,703 4,698 7,028

Balance sheet restated

Housing properties at valuation 672,505 565,264 517,734 445,943 403,639

Other tangible fixed assets 58,740 25,934 15,158 11,709 8,515

Net current assets/(liabilities) (1,504) (7,726) 9,593 (14,909) (4,495)

Total assets less current liabilities 729,741 583,472 542,485 442,743 407,659

Long-term creditors 452,145 303,730 262,943 177,595 164,779

Provisions and other long-term liabilities 1,767 – 100 100 100

Reserves 275,829 279,742 279,442 265,048 242,780

Total funding 729,741 583,472 542,485 442,743 407,659

Accommodation figures

Total housing stock owned or managed at

year end (number of dwellings): 13,618 13,238 11,404 11,301 11,190

Restatement

The balance sheet as at March 2007 has been restated

to remove a consolidated adjustment of £280k that was

not required. The restatement has reduced the balances

of housing properties and reserves.

Accounting policies

There were no changes to accounting policies from last

year, although the changes to the pension arrangements

for staff (see below) should be noted.

Post balance-sheet events

We consider that there have been no events since the

year end that have had a significant effect on the

Group’s financial position.

Reserves

After transfer of the surplus for the year of £1.4m (2007:

£5.7m deficit) at the year end Group reserves amounted

to £275.8m (2007: £279.7m), including an accumulated

revaluation surplus on housing properties of £218.6m

(2007: £224.4m).



Donations

The Group made charitable donations during the year

of £2,800 (2007: £4,620). No donations were given to

charities of which Board members are Trustees.

Housing properties

At 31 March 2008 the Group owned 11,079 properties

(2007: 10,523). The Board appointed external

professional valuers to undertake a desktop valuation of

the Group’s housing properties as at 31st March 2008.

The value of the properties which includes properties

held for letting at existing use value for social housing,

shared ownership properties at existing use value for

social housing less net present liability to repay social

housing grant and properties under construction held

at cost was £672.5million and this has been reflected in

the valuation of properties in the financial statements.

Surplus for the year – dependency on property

sales/reduction of overheads

As with many organisations in this sector, surpluses are

becoming increasingly dependent upon the outright sale

of housing assets.

To become less dependent on property sales, East

Thames Group Limited actively seeks ways to reduce

central overheads. Ways found include:

• a paper-light project to replace paper with electronic

documentation;

• electronic equipment set to shut down (rather than

go on standby) after not being used;

• a new Group structure with fewer directors;

• reviewing procedures and processes to simplify actions

that have become complex as the Group has grown;

• starting a major Value for Money project review,

using both external advice and internal suggestions

and support;

• closing our in-house maintenance department and

outsourcing the work to maintenance partners.

The Value for Money review is a major project that will

result in changes Group wide. A new structure has been

mapped and the implementation of these changes will

have a positive impact on the services we provide to

our customers.

The in-house maintenance department will close from

April 2008; employees in this area will be transferred

under the TUPE guidelines to our partners who will

provide future maintenance services.

Pensions

Following consultation with employees and staff

representative organisations, we closed the Social

Housing Pension Scheme (SHPS) to new members

from 1st April 2008. With Friends Provident we now offer

a new money-purchase scheme to both new and

existing staff, with up to 12% employer contribution.

Further details regarding the pension schemes can be

found in note 8 of the financial statements.

Capital structure and treasury policy

As at 31 March 2008, the Group had a total loan facility

of £457m:

• £200m loan with Nationwide Building Society;

• £250m with Barclays Bank;

• £7m with Orchardbrook and THFC.

We have also signed Heads of Terms with Lloyds Bank

plc for additional facilities of £100m.

During 2007-08, East Treasury drew down £147.5m of

these loan facilities.

As a result of its development activities, the Group is a

significant net borrower. We aim our cash management

policy at minimising the overall bank balance and

manage exposure to interest rates through fixed rate

loans and SWAPS.

Loan covenants were met throughout the year. The main

financial covenants were:

• Minimum interest cover 95%, actual 2008: 175%

(2007: 137%);

• Minimum asset cover 120%, actual 2008: 153%

(2007: 172%);

• Maximum gearing 70%, actual 2008: 59%

(2007: 51.5%).


EAST THAMES GROUP LIMITEDINDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EAST THAMES GROUP LIMITED

We have audited the Group and association financial

statements of East Thames Group Limited for the year

ended 31 March 2008, which comprise the Group and

association income and expenditure accounts, the

Group and association balance sheets, the Group and

association cash flow statements, the Group statements

of total recognised surpluses and deficits and the related

notes. These financial statements have been prepared

under the accounting policies set out therein.

This report is made solely to the association’s members,

as a body, in accordance with regulations made under

section 235 of the Companies Act 1985. Our audit work

has been undertaken so that we might state to the

association’s members those matters we are required to

state to them in an auditors’ report and for no other

purpose. To the fullest extent permitted by law, we do

not accept or assume responsibility to anyone other

than the association and the association’s members as

a body, for our audit work, for this report, or for the

opinions we have formed.

Respective responsibilities of the Board and

auditors

The responsibilities of the Board for preparing the report

and financial statements in accordance with applicable

law and United Kingdom Accounting Standards (United

Kingdom Generally Accepted Accounting Practice) are

set out in the statement of responsibilities of the board

for the financial statements.

Our responsibility is to audit the financial statements in

accordance with relevant legal and regulatory

requirements and International Standards on Auditing

(UK and Ireland).

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

2006.

We also report to you if, in our opinion, the Report of the

Board is consistent with the financial statements. The

information given in the Report of the Board includes

the specific information presented in the Operating and

Financial Review that is cross-referred from the Report

of the Board.

In addition, we report to you if, in our opinion, the

association 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 directors’ remuneration

and other transactions is not disclosed.

We read the other information accompanying the

financial statements and consider whether it is

consistent with the audited financial statements.

The other information comprises only the Report of the

Board and the Operating and Financial Review. We

consider the implications for our report if we become

aware of any apparent misstatements or material

inconsistencies with the financial statements. Our

responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International

Standards on Auditing (UK and Ireland) 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 Group’s and association’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



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EAST THAMES GROUP LIMITED, continued

Opinion

In our opinion:

• the financial statements give a true and fair view, in

accordance with United Kingdom Generally Accepted

Accounting Practice, of the state of affairs of the Group

and association as at 31 March 2008 and of the

surplus for the year then ended;

• the financial statements 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

2006; and

• the information given in the Report of the Board is

consistent with the financial statements.

Grant Thornton UK LLP

Chartered Accountants and Registered Auditors

Cambridge, England

29 August 2008


EAST THAMES GROUP LIMITED CONSOLIDATED INCOME AND EXPENDITURE ACCOUNTFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

Note £’000 £’000

Turnover: continuing activities 2 101,704 84,635

Operating costs 2 (95,706) (76,506)

Operating surplus: continuing activities 5,998 8,129

Surplus on sale of fixed assets – housing properties 4 7,119 8,828

Net interest payable and similar charges 7 (11,064) (10,040)

Exceptional item – breakage costs (667) (12,579)

(11,731) (22,619)

Surplus/(deficit) on ordinary activities before taxation 1,386 (5,662)

Tax on surplus on ordinary activities 18 (21) –

Surplus/(deficit) for the financial year 1,365 (5,662)

The notes on pages 23 to 48 form part of these financial statements.


EAST THAMES GROUP LIMITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITSFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

Note £’000 £’000

Surplus/(deficit) for the financial year 1,365 (5,662)

Unrealised (deficit)/surplus on revaluation of

housing properties 24 (4,367) 5,682

Unrealised (deficit) on grant 24 (911) –

Total recognised (deficits)/surpluses for the year (3,913) 20

NOTE OF HISTORICAL COST SURPLUSES AND DEFICITSFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

£’000 £’000

Reported surplus/(deficit) on ordinary activities 1,365 (5,662)

Excess of actual depreciation over historical cost depreciation 560 461

Realisation of property revaluation surpluses 831 1,451

Historical cost surplus/(deficit) on ordinary activities

before taxation 2,756 (3,750)

Historical cost surplus/(deficit) for the year after taxation 2,735 (3,750)

RECONCILIATION OF MOVEMENTS IN GROUP’S FUNDSFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

£’000 £’000

restated

Opening total funds 279,742 279,722

Total recognised (deficits)/surpluses relating to the year (3,913) 20

Closing total funds 275,829 279,742


EAST THAMES GROUP LIMITED CONSOLIDATED BALANCE SHEETAT 31 MARCH 2008

2008 2007

Note £’000 £’000

restated

Tangible fixed assets

Housing properties at valuation 10 672,505 565,264

Other fixed assets 11 58,740 25,934

731,245 591,198

Investments

Cost of HomeBuy and Starter Home Initiative 10 27,806 31,706

Less: Social Housing Grant 10 (27,806) (31,706)

– –

Current assets

Properties for sale 13 11,619 12,514

Debtors 14 23,859 7,271

Investments 12 – –

Cash at bank and in hand 15, 29 6,680 8,199

42,158 27,984

Creditors: amounts falling due within one year 16 (43,662) (35,710)

Net current liabilities (1,504) (7,726)

Total assets less current liabilities 729,741 583,472

Creditors: amounts falling due after more than one year 17 452,145 303,730

Provision for liabilities 22 1,767 –

453,912 303,730

Capital and reserves

Share capital 23 – –

Revenue reserve 24 57,089 52,356

Designated reserve 24 – 2,978

Restricted reserve 24 112 22

Consolidation reserve 24 – –

Revaluation reserve 24 218,628 224,386

Consolidated funds 275,829 279,742

729,741 583,472

The financial statements were approved by the Board on Friday, 18 July 2008, and signed on its behalf by:

Robert Chilton Andrew Newell Henry Potter

Chairman Treasurer Group Company Secretary


EAST THAMES GROUP LIMITED CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

Note £’000 £’000

Net cash flow from operating activities 27 1,761 19,221

Returns on investments and servicing of finance

Interest received 1,267 525

Interest paid (16,971) (12,677)

Breakage costs paid (667) (13,860)

Net cash outflow on servicing of finance (16,371) (26,012)

Corporation tax – –

Capital expenditure and financial investments

Purchase and construction of housing properties (160,546) (78,005)

Purchase of other fixed assets (24,160) (11,714)

Social Housing Grant received 30,767 15,526

Social Housing Grant repaid (1,718) (3,737)

Other capital grants received 34 1,089

Other capital grants repaid – (1,575)

Proceeds of first tranche sales 12,168 19,120

Proceeds of HomeBuy 1,471 1,473

Sales of housing properties 13,097 17,255

Sales of Starter Homes Initiatives 3,498 3,799

Proceeds from disposal of investments – 1,685

Cash outflow from investing activities (125,389) (35,084)

Acquisitions

Purchase of subsidiary (6,080) –

Net overdraft acquired (436) –

Cash outflow from acquisitions (6,516) –

Cash outflow before financing (146,515) (41,875)

Financing

Housing loans received 297,375 91,724

Housing loans repaid (151,928) (45,828)

Loan issue costs paid (189) (1,020)

Cash inflow from financing 28 145,258 44,876

(Decrease)/increase in cash in the year 28 (1,257) 3,001


EAST THAMES GROUP LIMITED PARENT INCOME AND EXPENDITURE ACCOUNTFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

Note £’000 £’000

Turnover: continuing activities 2 14,314 18,011

Operating costs 2 (14,362) (17,123)

Operating (deficit)/surplus: continuing activities (48) 888

Net interest receivable 7 – –

(Deficit)/surplus on ordinary activities (48) 888





EAST THAMES GROUP LIMITED PARENT BALANCE SHEETAT 31 MARCH 2008

2008 2007

Note £’000 £’000

Tangible fixed assets 11 6,218 22,407

Current assets

Debtors 14 10,761 10,920

Creditors: amounts falling due within one year 16 (10,692) (27,326)

Net current assets/(liabilities) 69 (16,406)

Total assets less current liabilities 6,287 6,001

Provision for liabilities 22 334 –

Capital and reserves

Share capital 23 – –

Revenue reserve 24 5,953 6,001

Restricted reserve 24 – –

Designated reserve 24 – –

5,953 6,001

6,287 6,001





EAST THAMES GROUP LIMITED PARENT CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2008

2008 2007

Note £’000 £’000

Net cash inflow from operating activities 27 4,198 13,020

Capital expenditure and financial investments

Purchase of fixed assets (3,936) (10,888)

(3,936) (10,888)

Increase in cash in the period 28 262 2,132


EAST THAMES GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008

1. Accounting policies

a) Basis of accounting

The financial statements of the parent company and the

Group are prepared under the historical cost 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 2006. Applicable accounting standards

and statements of recommended practice have been

followed.

Basis of consolidation

The Group financial statements consolidate the financial

statements of East Thames Group Limited and its

subsidiaries East Homes Limited, East Foundation

Limited, East Place Limited, East Living Limited, East

Potential, East Regen Limited, East Treasury Limited and

EH Street Properties Limited using acquisition accounting.

b) Turnover

Turnover 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 properties

Housing 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 Existing Use

Value for Social Housing (EUV-SH) less the Net Present

Liability to repay Social Housing Grant (SHG). 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. The capital

element of expenditure is determined by deciding if the

works result in an enhancement of economic benefits of

the asset – e.g. an increase in the net rental stream over

the life of the property. An increase in the net rental

stream may arise through an increase in the net rental

income, a reduction in future maintenance costs or a

significant extension of the life of the property.

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 the donation.

d) Depreciation of housing properties

Freehold land, shared ownership properties and assets

held in the course of completion are 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 and care stock of housing properties.

Shared ownership properties are not depreciated

because the shared owner has significant equity in

the property and is responsible for its maintenance.


NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued

1. Accounting policies, continued

e) Social Housing Grant

Social Housing Grant (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.

f) Other grants

Other grants include grants from local authorities and

other organisations. 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) Properties for sale

Completed properties for outright sale and properties

under construction are valued at the lower of cost and

net realisable value. Cost comprises materials, direct

labour and direct development overheads. Net

realisable value is based on estimated sales price after

allowing for all further costs of completion and disposal.

h) True and fair override

Under the requirements of the SORP, capital grants

are shown as a deduction from the cost of housing

properties on the balance sheet (see note 10). This is

a departure from the rules under schedule 4 of the

Companies Act 1985 but in the opinion of the Board is a

relevant accounting policy, comparable to that adopted

by other registered social landlords, that has been

adopted in order to present a true and fair view.

i) Other tangible fixed assets

Service 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 other than head office 4%

Head office 2%

(specifically designed for this life expectation)

Lifts 4%

Office furniture and improvements 14.3%

Service equipment 20%

Motor vehicles 25%

Computer equipment 33.3%

Major software 10%

j) Pensions

The Group participates in the defined benefit, multi-

employer Social Housing Pension Scheme. 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. Although the Group participates in a defined

benefit scheme it is unable to identify its share of the

underlying assets and liabilities. The pension costs

charged against operating profit are the contributions

payable to the scheme in respect of the accounting

period. Further information on the surplus/deficit in the

scheme is given in note 8. From 1 April 2008 this

scheme was closed to new employees and existing

employees not already in the scheme; a money

purchase scheme run by Friends Provident will be

made available instead.



1. Accounting policies, continued

k) Agency managed hostels

The Group has brought into its financial statements only

income and expenditure under its direct control in

respect of agency managed hostels.

l) Taxation

East Thames Group Limited is a registered charity and

is registered under the Companies Act 1985 and is not

generally subject to corporation tax. The subsidiaries

East Place Limited and East Regen Limited are liable

for corporation tax due to their activities.

m) HomeBuy

A subsidiary of the group, East Homes 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 social housing grant. No rent is

payable to the company. The company receives an

allowance for handling the transaction, paid by way

of further grant.

n) Impairment

Housing properties which are depreciated over a period

in excess of 50 years are subject to impairment reviews

annually. Other assets are reviewed for impairment if

there is an indication that impairment may have

occurred. Where there is evidence of impairment, fixed

assets are written down to their recoverable amount.

Any such write down is charged to operating surplus.

o) Leased assets

Rentals payable under operating leases are charged to

the income and expenditure account on a straight-line

basis over the lease term.

p) Provisions

Provisions are recognised when the Group has a

present legal or constructive obligation as a result of

past events, it is more likely than not that an outflow of

resources will be required to settle the obligation and

the amount can be estimated reliably.

q) Balance sheet restatements

The comparatives have been restated to remove a

consolidation adjustment of £280k that was not required.

The restatement has reduced the opening balances for

housing properties and reserves. Further details are

given in Note 24.



2. Particulars of turnover, cost of sales, operating costs and operating surplus

2008 2007

Operating Operating

Operating surplus/ surplus/

Turnover costs (deficit) (deficit)

GROUP £’000 £’000 £’000 £’000

Social housing lettings

Housing accommodation 39,959 34,100 5,859 9,336

Special needs accommodation 17,955 17,531 424 719

Temporary social housing 9,637 9,804 (167) (144)

Shared ownership accommodation 7,283 2,609 4,674 1,965

74,834 64,044 10,790 11,876

Other social housing activities

Regeneration and development services 5,275 4,862 413 (153)

Abortive costs – 329 (329) (877)

Community involvement 2,960 5,498 (2,538) (2,589)

Sales of properties developed for sale to other

Registered Social Landlords 14,700 14,700 – –

Other 951 3,647 (2,696) (128)

23,886 29,036 (5,150) (3,747)

Non-social housing activities

Development for sale 2,984 2,626 358 –

2,984 2,626 358 –

Total 101,704 95,706 5,998 8,129

2008 2007

Operating Operating

Operating surplus/ surplus/

Turnover costs (deficit) (deficit)

PARENT £’000 £’000 £’000 £’000

Other income and expenditure

Group recharge 11,321 14,062 (2,741) (4,530)

Donation received from Group member 2,216 300 1,916 5,000

Other 777 – 777 418

Total 14,314 14,362 (48) 888

The abortive costs relate to one-off expenditure on large potential development projects which did not progress due

to planning issues.



3. Income and expenditure from social housing lettings

Care and

supported housing

Residential Temporary

Housing Supported care social Shared

accommodation housing homes housing ownership 2008 2007

GROUP £’000 £’000 £’000 £’000 £’000 £’000 £’000restated

Rent receivable net of

identifiable service charges 33,715 2,440 420 8,568 5,369 50,512 49,816

Service charges receivable 1,853 4,182 – – 502 6,537 5,874

Net rental income 35,568 6,622 420 8,568 5,871 57,049 55,690

Revenue grants from local

authorities and other agencies 3,225 2,201 5,926 – – 11,352 10,809

Support charges – fixed contract – 2,126 (43) – – 2,083 2,181

Other grants 73 – – 27 – 100 1,046

Other income 1,093 703 – 1,042 1,412 4,250 4,093

Turnover from social

housing lettings 39,959 11,652 6,303 9,637 7,283 74,834 73,819

Services 1,973 1,096 511 15 496 4,091 3,096

Management 17,298 8,716 5,958 1,419 2,002 35,393 35,150

Rent payable to PSL landlords 1,125 – – 7,649 – 8,774 10,503

Routine maintenance 7,023 1,073 155 680 99 9,030 7,995

Planned maintenance 3,640 – – 1 9 3,650 3,279

Rent losses from bad debts 485 (13) – 40 – 512 399

Revenue element of major

repairs expenditure 1,323 – – – 3 1,326 322

Housing properties depreciation 1,233 – – – – 1,233 1,160

Other costs – – 35 – – 35 39

Operating costs on social

housing lettings 34,100 10,872 6,659 9,804 2,609 64,044 61,943

Operating surplus/(deficit)

on social housing lettings 5,859 780 (356) (167) 4,674 10,790 11,876

Void losses 598 153 74 521 178 1,524 1,797

Restatement of costs

Management costs for 2007 were previously shown as £45,911k. This year an additional line has been added to show rent payable to

PSL landlords separately; £10,503k has been moved to this cost line. £258k of utility costs has been moved from management costs

to service costs as they were classified incorrectly last year.



4. Sale of fixed assets – housing properties

Sales Cost 2008 2007

proceeds of sales Surplus Surplus

GROUP £’000 £’000 £’000 £’000

Sales of older and shared ownership properties 13,097 6,964 6,133 7,816

HomeBuy 1,471 1,065 406 419

Starter Homes Initiative – current year sales 3,498 2,918 580 371

18,066 10,947 7,119 8,606

Starter Homes Initiative – release of prior year surpluses – 222

7,119 8,828

5. Units of accommodation in management

2008 2007

Social housing owned General housing 7,281 7,074Supported housing and housing for older people 1,455 1,481Low cost home (shared) ownership 1,743 1,491Temporary social housing 34 38Intermediate rent 266 180

Total Owned 10,779 10,264

Accommodation managed General housing 80 80for others Supported housing and housing for older people 115 115

Temporary social housing 706 841

Total accommodation managed 901 1,036for others

Total social housing managed 11,680 11,300

Non-social housing owned Offices and community centres 22 20Market and commercial rent 30 26Garages 124 123Out of management 34 29Static homebuy 60 54Outright sales 25 4Other 5 3

Total Owned 300 259

Accommodation managed Offices and community centres 23 23for others Market and commercial rent 141 141

Long leased properties 587 520HomeBuy 334 363Starter home initiatives 507 586Fixed equity 38 38Other 8 8

Total managed for others 1,638 1,679

Total non-social housing managed 1,938 1,938

Total social and non-social housing 13,618 13,238



6. Operating surplus

Group Group Parent Parent

2008 2007 2008 2007

£’000 £’000 £’000 £’000

This is arrived at after charging:

Depreciation of housing properties 1,233 1,160 – –

Depreciation of tangible fixed assets 1,198 1,086 740 964

Profit or loss on sale of other fixed assets – – – –

Operating leases on land and buildings –

(to cover rental payments to Private Sector Landlords

for properties used for temporary accommodation for

START tenants) 8,774 10,468 – –

Fees payable to the company’s auditor for

the audit of the financial statements 11 11 11 11

Audit of the financial statements of the

company’s subsidiaries pursuant to legislation 54 54 – –

Fees payable to the company’s auditor

for other services 44 6 – –

7. Net interest payable and similar charges


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Interest receivable 205 245 – –

Interest payable on loans and leases:

– repayable wholly within five years – – – –

– repayable in more than five years (17,372) (13,862) – –

(17,167) (13,617) – –

Interest receivable from other RSLs 1,062 524 – –

Interest payable capitalised on housing

properties under construction 4,574 3,771 – –

Interest payable capitalised on commercial

properties under construction 1,567 148 – –

Interest receivable transferred to the RCGF/DPF (887) (679) – –

Amortisation of loan issue costs (87) (72) – –

Interest receivable transferred to the

Housing Corporation SHI (126) (115) – –

(11,064) (10,040) – –

Capitalisation rate used to determine the

finance costs capitalised during the period 5% 5% – –



An employer can elect to operate different benefit

structures for their active members (as at the first day

of April in any given year) and their new entrants.

An employer can only operate one open benefit

structure at any one time. An open benefit structure

is one which new entrants are able to join.

East Thames Group Limited has elected to operate the

final salary with a 1/60th accrual rate, benefit structure

for active members as at 31 March 2008.

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 determine the level of future

contributions required, in respect of each benefit

structure, so that the Scheme can meet its pension

obligations as they fall due. From April 2007 the split

of the total contribution rate between member and

employer is set at individual employer level, subject to

the employer paying no less than 50% of the total

contribution rate.

Social Housing Pension Scheme (SHPS)

East Thames Group Limited participates in the Social

Housing Pension Scheme (SHPS). The Scheme is

funded and is contracted out of the state scheme.

SHPS is a multi-employer defined benefit scheme.

Employer participation in the Scheme is subject to

adherence with the employer responsibilities and

obligations as set out in the “SHPS House Policies

and Rules Employer Guide”.

The Scheme operated a single benefit structure, final

salary with a 1/60th accrual rate until 31 March 2007.

From April 2007 there are three benefit structures

available, namely:

• Final salary with a 1/60th accrual rate:

• Final salary with a 1/70th accrual rate:

• Career average revalued earnings with a 1/60th

accrual rate

8. Employees


2008 2007 2008 2007

Number of employees expressed in

full time equivalents

Administration 528 516 120 119

Care staff 455 475 – –

Direct labour 60 61 – –

1,043 1,052 120 119


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Staff costs

Wages and salaries 26,715 25,586 4,191 4,451

Social security costs 2,487 2,399 396 432

Other pension costs 1,576 1,234 398 331

30,778 29,219 4,985 5,214



8. Employees, continued

The actuarial valuation assesses whether the Scheme’s

assets at the valuation date are likely to be sufficient to

pay the pension benefits accrued by members as at the

valuation date. Asset values are calculated by reference

to market levels. Accrued pension benefits are valued by

discounting expected future benefit payments using a

discount rate calculated by reference to the expected

future investment returns.

During the accounting period East Thames Group

Limited paid contributions at the rate of 14.1%.

Member contributions varied between 3.1% and 6.1%.

As at the balance sheet date there were 322 active

members of the Scheme employed by East Thames

Group Limited. The annual pensionable payroll in

respect of these members was £1,449k.

It is not possible in the normal course of events to

identify on a reasonable and consistent basis the

share of underlying assets and liabilities belonging to

individual participating employers. Accordingly, due to

the nature of the Scheme, the accounting charge for

the period under FRS17 represents the employer

contribution payable.

The last formal valuation of the Scheme was performed

as at 30 September 2005 by a professionally qualified

actuary using the Projected Unit Method. The market

value of the Scheme’s assets at the valuation date

was £1,278 million. The valuation revealed a shortfall

of assets compared with the value of liabilities of £283

million, equivalent to a past service funding level

of 82%.

The Scheme Actuary has prepared an Actuarial Report

that provides an approximate update on the funding

position of the Scheme as at 30 September 2007.

Such a report is required by legislation for years in

which a full actuarial valuation is not carried out. The

funding update revealed an increase in the assets of

the Scheme to £1,760 million and indicated a decrease

in the shortfall of assets compared to liabilities to

approximately £209 million, equivalent to a past service

funding level of 89%. Annual funding updates of the

SHPS Scheme are carried out using approximate

actuarial techniques rather than member by member

calculations, and will therefore not produce the same

results as a full actuarial valuation. However they will

provide a good indication of the financial progress of

the scheme since the last full valuation.

Since the contribution rates payable to the Scheme

have been determined by reference to the last full

actuarial valuation the following notes relate to the

formal actuarial valuation as at 30 September 2005.

The financial assumptions underlying the valuation as

at 30 September 2005 were as follows:

% pa

Investment return pre retirement 7.2

Investment return post retirement 4.8

Rate of salary increases to 30 September 2010 5.0

Rate of salary increases from 1 October 2010 4.0

Rate of pension increases 2.5

Rate of price inflation 2.5

The valuation was carried out using the PA92C2025

mortality table for non-pensioners and PA92C2013

mortality table for pensioners. The table below illustrates

the assumed life expectancy in years for pension

scheme members at age 65 using these mortality

assumptions:

Males Females

Assumed life Assumed life

expectancy in expectancy in

years at age 65 years at age 65

Non-pensioners 20.4 23.3

Pensioners 19.4 22.4




The long-term joint contribution rates required from

employers and members to meet the cost of future

benefit accrual were assessed at:

Benefit structure Long-term joint contribution

rate (% of pensionable salaries)

Final salary with a

1/60th accrual rate 17.6

Final salary with a

1/70th accrual rate 15.3

Career average

revalued earnings with

a 1/60th accrual rate 14.1

The long-term joint contribution rates required from

employers and members where contributions are set on

an age related basis are:

Benefit structure Long-term joint contribution

rate (% of pensionable salaries)

Age Under 30 30-40 Over 40

Final salary with a

1/60th accrual rate 16.1 17.1 18.1

Final salary with a

1/70th accrual rate 13.8 14.8 15.8

Career average

revalued earnings with

a 1/60th accrual rate 12.6 13.6 14.6

If an actuarial valuation reveals a shortfall of assets

compared to liabilities the Trustee must prepare a

recovery plan setting out the steps to be taken to make

up the shortfall.

Following consideration of the results of the actuarial

valuation it was agreed that the shortfall of £283 million

would be dealt with by the payment of deficit

contributions of 4.4% of pensionable salaries with effect

from 1 April 2007. These deficit contributions are in

addition to the long-term joint contribution rates set

out in the table above.

Employers that participate in the Scheme on a non-

contributory basis pay a joint contribution rate (i.e. a

combined employer and employee rate).

Employers that have closed the Scheme to new

entrants, including East Thames Group Limited, are

required to pay an additional employer contribution

loading of 3.0% to reflect the higher costs of a closed

arrangement.

A small number of employers are required to contribute

at a different rate to reflect the amortisation of a surplus

or deficit on the transfer of assets and past service

liabilities from another pension scheme into the SHPS

Scheme.

Employers joining the Scheme after 1 October 2002

that do not transfer any past service liabilities to the

Scheme pay contributions at the ongoing future service

contribution rate. This rate is reviewed at each valuation

and applies until the second valuation after the date

of joining the Scheme, at which point the standard

employer contribution rate is payable. Contribution rates

are changed on the 1 April that falls 18 months after the

valuation date.

It the valuation assumptions are borne out in practice

this pattern of contributions should be sufficient to

eliminate the past service deficit by 30 September 2020.

A copy of the recovery plan, setting out the level of

deficit contributions payable and the period for which

they will be payable, must be sent to the Pensions

Regulator. The Regulator has the power under Part 3

of the Pensions Act 2004 to issue scheme funding

directions where it believes that the actuarial valuation

assumptions and/or recovery plan are inappropriate. For

example the Regulator could require that the Trustee

strengthens the actuarial assumptions (which would

increase the scheme liabilities and hence impact on the

recovery plan) or impose a schedule of contributions on

the Scheme (which would effectively amend the terms

of the recovery plan). The Regulator has reviewed the

recovery plan for the SHPS Scheme and confirmed that,

in respect of the September 2005 actuarial valuation,

it does not propose to issue any scheme funding

directions under Part 3 of the Pensions Act 2004.




The next full actuarial valuation will be carried out as at

30 September 2008.

As a result of pension scheme legislation there is a

potential debt on the employer that could be levied by

the Trustee of the Scheme. The debt is due in the event

of the employer ceasing to participate in the Scheme or

the Scheme winding up.

The debt for the Scheme as a whole is calculated by

comparing the liabilities for the Scheme (calculated on

a buyout basis i.e. the cost of securing benefits by

purchasing annuity policies from an insurer, plus an

allowance for expenses) with the assets of the Scheme.

If the liabilities exceed assets there is a buy-out debt.

The leaving employer’s share of the buy-out debt is

the proportion of the Scheme’s liability attributable to

employment with the leaving employer compared to

the total amount of the Scheme’s liabilities (relating to

employment with all the currently participating

employers). The leaving employer’s debt therefore

includes a share of any ‘orphan’ liabilities in respect of

previously participating employers. The amount of the

debt therefore depends on many factors including total

Scheme liabilities, Scheme investment performance,

the liabilities in respect of current and former employees

of the employer, financial conditions at the time of the

cessation event and the insurance buy-out market.

The amounts of debt can therefore be volatile over time.

East Thames Group Limited has been notified by the

Pensions Trust of the estimated employer debt on

withdrawal from the Social Housing Pension Scheme

based on the financial position of the Scheme as at

31 March 2007. As of this date the estimated employer

debt for East Thames Group Limited was £27,190,000.

Pensions Trust – Growth Plan

East Thames Group Limited participates in the Pensions

Trust’s Growth Plan. The Plan is funded and is not

contracted out of the state scheme. The Growth Plan is

a multi-employer pension Plan.

Contributions paid into the Growth Plan up to and

including September 2001 were converted to defined

amounts of pension payable from Normal Retirement

Date. From October 2001 contributions were invested

in personal funds which have a capital guarantee and

which are converted to pension on retirement, either

within the Growth Plan or by the purchase of an annuity.

The rules of the Growth Plan allow for the declaration of

bonuses and/or investment credits if this is within the

financial capacity of the Plan assessed on a prudent

basis. Bonuses/investment credits are not guaranteed

and are declared at the discretion of the Plan’s Trustee.

The Trustee commissions an actuarial valuation of the

Growth Plan every three years. The purpose of the

actuarial valuation is to determine the funding position of

the Plan by comparing the assets with the past service

liabilities as at the valuation date. Asset values are

calculated by reference to market levels. Accrued past

service liabilities are valued by discounting expected

future benefit payments using a discount rate calculated

by reference to the expected future investment returns.

The rules of the Growth Plan give the Trustee the power

to require employers to pay additional contributions in

order to ensure that the statutory funding objective

under the Pensions Act 2004 is met. The statutory

funding objective is that a pension scheme should have

sufficient assets to meet its past service liabilities,

known as Technical Provisions.

If the actuarial valuation reveals a deficit, the Trustee

will agree a recovery plan to eliminate the deficit over

a specified period of time either by way of additional

contributions from employers, investment returns or a

combination of these.

East Thames Group Limited offers the Growth Plan as

an AVC investment option for members of the Social

Housing Pension Scheme. The members pay

contributions at a rate of their choice. East Thames

Group Limited does not normally pay any contributions

to the Growth Plan.




It is not possible in the normal course of events to

identify on a reasonable and consistent basis the

share of underlying assets and liabilities belonging to

individual participating employers. Accordingly, due to

the nature of the Plan, the accounting charge for the

period under FRS17 represents the employer

contribution payable.

The last formal valuation of the Scheme was performed

as at 30 September 2005 by a professionally qualified

actuary using the Projected Unit Method. The market

value of the Scheme’s assets at the valuation date was

£675 million and the Plan’s Technical Provisions (i.e.

past service liabilities) were £704 million. The valuation

therefore revealed a shortfall of assets compared with

the value of liabilities of £29 million, equivalent to a

funding level of 96%.

The Scheme Actuary has prepared an Actuarial Report

that provides an approximate update on the funding

position of the Plan as at 30 September 2006. Such a

report is required by legislation for years in which a full

actuarial valuation is not carried out. The funding update

revealed an increase in the assets of the Scheme to

£747 million and indicated a surplus of assets compared

to liabilities to approximately £2 million, equivalent to a

funding level of 100.2%. Annual funding updates of the

Growth Plan are carried out using approximate actuarial

techniques rather than member by member calculations,

and will therefore not produce the same results as a full

actuarial valuation. However they will provide a good

indication of the financial progress of the Plan since the

last full valuation.

Since the contribution rates payable to the Plan have

been determined by reference to the last full actuarial

valuation the following notes relate to the formal

actuarial valuation as at 30 September 2005.

The financial assumptions underlying the valuation as at

30 September 2005 were as follows:

% pa

Investment return pre retirement 6.6

Investment return post retirement 4.5

Bonuses on accrued benefits 0.0

Rate of price inflation 2.5

In determining the investment return assumptions the

Trustee considered advice from the Scheme Actuary

relating to the probability of achieving particular levels

of investment return. The Trustee has incorporated an

element of prudence into the pre and post retirement

investment return assumptions; such that there is a

60% expectation that the return will be in excess of that

assumed and a 40% chance that the return will be lower

than that assumed over the next 10 years.

If an actuarial valuation reveals a shortfall of assets

compared to liabilities the Trustee must prepare a

recovery plan setting out the steps to be taken to make

up the shortfall.

In view of the small funding deficit and the level of

prudence implicit in the assumptions used to calculate

the Plan liabilities the Trustee has prepared a recovery

plan on the basis that no additional contributions from

participating employers are required at this point in time.

In reaching this decision the Trustee has taken actuarial

advice and has been advised that the shortfall of £29

million will be cleared within 5 years if the investment

returns from assets are in line with the “best estimate”

assumptions. “Best estimate” means that there is a 50%

expectation that the return will be in excess of that

assumed and a 50% expectation that the return will be

lower than that assumed over the next 10 years. These

“best estimate” assumptions are 7.6% per annum pre

retirement and 4.8% per annum post retirement.




A copy of the recovery plan must be sent to the

Pensions Regulator. The Regulator has the power under

Part 3 of the Pensions Act 2004 to issue scheme

funding directions where it believes that the actuarial

valuation assumptions and/or recovery plan are

inappropriate. For example the Regulator could require

that the Trustee strengthens the actuarial assumptions

(which would increase the scheme liabilities and hence

impact on the recovery plan) or impose a schedule of

contributions on the Scheme (which would effectively

amend the terms of the recovery plan). The Regulator

has reviewed the recovery plan for the Growth Plan

and confirmed that, in respect of the September 2005

actuarial valuation, it does not propose to issue any

scheme funding directions under Part 3 of the Pensions

Act 2004.

The next full actuarial valuation will be carried out as at

30 September 2008. An Actuarial Report will be

prepared as at 30 September 2007 in line with statutory

regulations.

Following a change in legislation in September 2005

there is a potential debt on the employer that could be

levied by the Trustee of the Plan. The Trustee’s current

policy is that it only applies to employers with pre

October 2001 liabilities in the Plan. The debt is due in

the event of the employer ceasing to participate in the

Plan or the Plan winding up.

The debt for the Plan as a whole is calculated by

comparing the liabilities for the Plan (calculated on a

buyout basis, i.e. the cost of securing benefits by

purchasing annuity policies from an insurer, plus an

allowance for expenses) with the assets of the Plan.

If the liabilities exceed assets there is a buy-out debt.

The leaving employer’s share of the buy-out debt is the

proportion of the Plan’s pre October 2001 liability

attributable to employment with the leaving employer

compared to the total amount of the Plan’s pre October

2001 liabilities (relating to employment with all the

currently participating employers). The leaving

employer’s debt therefore includes a share of any

‘orphan’ liabilities in respect of previously participating

employers. The amount of the debt therefore depends

on many factors including total Plan liabilities, Plan

investment performance, the liabilities in respect of

current and former employees of the employer, financial

conditions at the time of the cessation event and the

insurance buy-out market. The amounts of debt can

therefore be volatile over time.

East Thames Group Limited has been notified by the

Pensions Trust of the estimated employer debt on

withdrawal from the Plan based on the financial position

of the Plan as at 30 September 2007. As of this date the

estimated employer debt for East Thames Group

Limited was £44,568.

NHS Pension Scheme

East Thames Group Limited employ 34 staff who are

members of the NHS Pension Scheme. Employees pay

contributions averaging 5.4% and East Thames Group

Limited pay contributions of 14%.

The NHS Pension Scheme is a statutory scheme,

with benefits fully guaranteed by the Government.

Contributions from both members and employers are

paid to the Exchequer, which meets the cost of scheme

benefits. The Exchequer also pays for the cost of

increasing benefits each year by the rate of inflation.

This extra cost is not met by contributions from scheme

members or employers.

Review of Pension Arrangements

During the year a review of current pension

arrangements was undertaken. Following this review

and consultation with employees the Social Housing

Pension Scheme (SHPS) has been closed to new

entrants from 1 April 2008.

SHPS levy a charge on members who do not allow

new entrants and this surcharge is currently 3% of

pensionable salary for all remaining members.

Future employees and current employees who were not

members of the Scheme at 31 March 2008 will have the

opportunity to participate in a money purchase scheme

with Friends Provident from 1 April 2008.



9. Directors, Members and Senior Staff emoluments

The Directors of the parent company as defined under the Accounting Requirements for Registered Social Landlords

General Determination 2006 are its Management Board, the Chief Executive and any other person who is a member

of the senior management team.

Basic Benefits Pension Total Total

salary in kind contributions 2008 2007

£’000 £’000 £’000 £’000 £’000

Chief Executive

June Barnes 144 1 20 165 144

Deputy Chief Executive

Martin Heys resigned 31/12/2007 84 1 – 85 109

Acting Group Director – Finance

Paul Thomson from 1/1/2008 24 – 3 27 –

Managing Director – East Homes Ltd to 31/8/2007

Group Director – Business Improvement 1/9/2007 – 31/12/2007

Group Director – Resident Services from 1/1/2008

Victor da Cunha 111 1 15 127 108

Managing Director – East Homes Ltd

Pamela Gardner from 10/9/2007 – 31/3/2008 43 – 6 49 –

Managing Director – East Living Ltd

Martin van Tol – resigned 21/12/2007 61 1 9 71 97

Managing Director – East Living Ltd

Caroline Cayzer – from 1/1/2008 17 – 2 19 –

Managing Director – East Potential

David Chesterton 79 1 11 91 86

Group Director – Development

Geoff Pearce 104 1 14 119 75

Group Director – Development

Steven Tarry (to 5/2006) – – – – 11

Group Director – Corporate Services

Davina Boakye 84 1 12 97 74

Group Director – Business Services

Jacky Kutner – resigned 23/11/2007 50 1 7 58 86

Group Company Secretary

Henry Potter 55 – 7 62 59

856 8 106 970 849

The highest paid director received remuneration of £165,000 (2007: £144,000).

The Chief Executive is an ordinary member of the pension scheme and has a contractual arrangement with East

Thames Group Limited covering additional voluntary contributions (AVC’s).

There are no other enhanced pension arrangements to which East Thames Group or any of its subsidiaries make a

contribution.

During the year directors received compensation payments for loss of office totalling £213k (2007: £nil).

Remuneration paid to committee members for the year amounts to £136,800 (2007: £104,582).

Expenses paid during the year to members of the Board amount to £15,247 (2007: £66,109).

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.



10. Tangible fixed assets – Housing properties

Shared Shared

Housing Housing ownership ownership

properties properties properties properties

held for under held for under

letting construction letting construction Total

Valuation £’000 £’000 £’000 £’000 £’000

As at 1 April 2007 restated * 395,187 68,091 79,128 68,978 611,384

Additions 12,691 100,648 4,603 37,462 155,404

Tenure change transfers 5,134 – (5,134) – –

Transfer to other fixed assets –

office properties – (8,277) – – (8,277)

Works to existing properties 17,591 – – – 17,591

Interest capitalised 355 1,911 (72) 2,380 4,574

Schemes completed 51,052 (51,052) 56,922 (56,922) –

Disposals (596) (377) (18,139) (19) (19,131)

Valuation adjustment (25,820) – (14,140) – (39,960)

At 31 March 2008 455,594 110,944 103,168 51,879 721,585

Depreciation and impairment

As at 1 April 2007 – – – – –

Depreciation charged in year 1,233 – – – 1,233

Valuation adjustment (1,233) – – – (1,233)

At 31 March 2008 – – – – –

Social housing and other grants

As at 1 April 2007 – 34,938 – 11,182 46,120

Additions 16,953 15,608 5,690 2,417 40,668

Schemes completed 9,050 (9,050) 6,015 (6,015) –

Disposals (361) – (2,987) – (3,348)

Valuation adjustment (25,642) – (8,718) – (34,360)

At 31 March 2008 – 41,496 – 7,584 49,080

Net book value

At 31 March 2008 455,594 69,448 103,168 44,295 672,505

At 31 March 2007 395,187 33,153 79,128 57,796 565,264

2008 2007

£’000 £’000

Expenditure on works to existing properties

Amount capitalised 17,591 6,826

Amounts charged to income and expenditure account 1,326 322

18,917 7,148

Total accumulated capital and revenue social grant receivable

Capital grants 511,933 474,613

Revenue grants – –

511,933 474,613

*Restatement

The opening balance of shared ownership properties has increased by £280k to £79,128 due to the removal of a consolidated adjustment

that was not required. Further details are given in Note 24.



10. Tangible fixed assets – Housing properties (continued)

2008 2007

£’000 £’000

Housing properties comprise:

Freehold land and buildings 672,150 564,909

Long leasehold land and buildings 355 355

672,505 565,264

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 last valuation

of completed housing properties was prepared as at 31 March 2008 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 558,762

558,762

Housing properties under construction at cost

East Homes Limited 162,823

721,585

In the valuing of housing properties, discounted cash flow methodology was adopted and key assumptions included:

Discount rate 5.5%

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:

2008 2007

£’000 £’000

restated

Historical cost 972,055 821,063

Social Housing Grant (460,873) (423,052)

Other capital grants (51,061) (51,561)

Depreciation and impairment (6,246) (5,573)

453,875 340,877

2008 2007

£’000 £’000

Investment in HomeBuy and Starter Home Initiative:

Long term investment in properties 31,706 35,945

New investment – 161

Decrease in investment in properties (3,900) (4,400)

Cost of HomeBuy and Starter Home Initiative 27,806 31,706

Less: Social Housing Grant (27,806) (31,706)

– –



11. Tangible fixed assets – other

Freehold I.T.

office under Freehold Equipment I.T. software Motor

construction office & furniture equipment development vehicles Total

GROUP £’000 £’000 £’000 £’000 £’000 £’000 £’000

Cost

At 1 April 2007 11,849 12,975 2,937 3,277 4,097 131 35,266

Additions 19,719 3,520 1,773 944 1,212 – 27,168

Transfer from housing

properties 5,648 2,629 – – – – 8,277

Office completed (37,216) 37,216 – – – – –

Disposals – – (250) – (1,351) (35) (1,636)

At 31 March 2008 – 56,340 4,460 4,221 3,958 96 69,075

Depreciation

At 1 April 2007 – (3,705) (1,774) (3,128) (600) (125) (9,332)

Charged in year – (365) (266) (227) (336) (4) (1,198)

Disposals – – – – 160 35 195

At 31 March 2008 – (4,070) (2,040) (3,355) (776) (94) (10,335)

Net book value

At 31 March 2008 – 52,270 2,420 866 3,182 2 58,740

At 31 March 2007 11,849 9,270 1,163 149 3,497 6 25,934

PARENT

Cost

At 1 April 2007 11,849 9,731 2,038 3,277 4,097 – 30,992

Additions – – 1,780 944 1,212 – 3,936

Disposals – – (250) – (1,351) – (1,601)

Transfer in group companies (11,849) (9,731) – – – – (21,580)

At 31 March 2008 – – 3,568 4,221 3,958 – 11,747

Depreciation

At 1 April 2007 – (3,636) (1,221) (3,128) (600) – (8,585)

Charged in year – – (177) (227) (336) – (740)

Disposals – – – – 160 – 160

Transfer in group companies – 3,636 – – – – 3,636

At 31 March 2008 – – (1,398) (3,355) (776) – (5,529)

Net book value

At 31 March 2008 – – 2,170 866 3,182 – 6,218

At 31 March 2007 11,849 6,095 817 149 3,497 – 22,407



12. Investments and related party transactions

13. Properties for sale

Group Group

2008 2007

£’000 £’000

Completed properties for sale to other Registered Social Landlords 5,160 9,860

Properties for sale to other Registered Social Landlords under

construction net of Social Housing Grant 6,459 2,654

11,619 12,514

The parent company owns one £1 nominal share in

East Living 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 requires it to classify it as

a subsidiary.

The parent company has entered into trust

arrangements with the members of East Potential which

require it to classify it as a subsidiary. The principal

activity of East Potential is the provision of housing

management services at the Stratford (Focus E15),

Harlow, Redbridge, Drapers Foyers and First Step

Assessment Centre and related training and information

services to young people in east London and Harlow.

East Regen Limited commenced trading on 1 April 2005

and has provided management and development

services for the Group during the year.

East Homes Limited has entered into a lease and

leaseback arrangement for the Stratford (Focus E15)

Foyer with East Potential, a fellow subsidiary, for a

period of 25 years. The net margin passing to East

Potential amounts to £5,000 per annum.

East Homes Limited invested £6.27 million in the

purchase of Reef Properties Limited of which £6.08

million was consideration costs and £0.19 million was

professional fees. The company is now a wholly-owned

subsidiary of East Homes Limited renamed and

registered as East Homes Street Properties Limited. All

the properties within the company had been transferred

to East Homes Limited prior to 31 March 2008. It is the

intention to wind up the shell company in the future.

The shares acquired in Reef Properties Limited were:

• 25,000 ordinary shares of 1p each

• 75,000 A-ordinary shares of 1p each

The net asset value of the subsidiary as at 31st March

2008 is £6.06 million.

The Existing Use Value of the properties transferred to

East Homes Limited is £2.3 million.



14. Debtors


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Due within one year:

Arrears of rent and service charges 4,128 3,414 – –

Less: Provision for bad and doubtful debts (2,126) (2,050) – –

2,002 1,364 – –

Other debtors 20,876 4,756 528 560

Prepayments and accrued income 981 1,151 153 196

Amounts due from group companies

(net of provisions) – – 10,080 10,164

23,859 7,271 10,761 10,920

15. Cash at bank and in hand

Included in cash at bank and in hand are amounts totalling Group: £Nil (Parent Company: £ Nil) 2007 Group

£200,000 (Parent Company: £ Nil) which are subject to restrictions and are not freely available for general use.

16. Creditors: amounts falling due within one year


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Loans (note 20) 5,038 5,050 – –

Bank overdraft 882 1,144 882 1,144

Rent and service charges received in advance 1,593 1,552 – –

Social Housing Grants received in advance 991 5,758 – –

Corporation Tax (note 18) 73 – – –

Amount due to group companies – – 4,531 20,375

Other taxation and social security 745 601 201 54

Other creditors 15,703 10,550 2,072 1,708

Accruals and deferred income 14,632 7,305 3,006 4,045

Recycled Capital Grant Fund (note 19) 3,639 3,140 – –

Disposal Proceeds Fund (note 19) 366 610 – –

43,662 35,710 10,692 27,326

Social Housing Grant received in advance will be utilised against capital expenditure in 2008-09.



17. Creditors: amounts falling due after more than one year


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Loans (note 20) 436,914 289,678 – –

Deferred income – – – –

Recycled Capital Grant Fund (note 19) 10,224 9,467 – –

Disposal Proceeds Fund (note 19) 1,412 1,047 – –

Other 3,595 3,538 – –

452,145 303,730 – –

18. Taxation


2008 2007 2008 2007

£’000 £’000 £’000 £’000

United Kingdom Corporation Tax:

Current tax on income for the year 20 – – –

Adjustments in respect of prior years 1 – – –

Tax on surplus/(deficit) on ordinary activities 21 – – –


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Current tax reconciliation:

Surplus/(deficit) on ordinary activities

before taxation 1,386 (5,662) (48) 888

Theoretical tax at UK corporation tax rate 30%

(2007: 30%) 416 (1,699) (14) 266

Effects of:

Surplus/(deficit) in respect of charitable activities (396) 1,699 14 (266)

Overprovision in prior years 1 – – –

Movement in tax losses – – – –

Current tax on surplus/(deficit) on

ordinary activities 21 – – –



19. Recycled Capital Grant Fund

Group Group

2008 2007

£’000 £’000

At 1 April 2007 12,607 9,883

Grants recycled 4,028 5,634

Interest accrued 779 587

Purchase/development of properties (3,552) (3,497)

13,862 12,607

Repayment of grant to Housing Corporation – –

Balance at 31 March 2008 13,862 12,607

Amount due for repayment to Housing Corporation 3,639 3,140

Disposal Proceeds Fund

Group Group

2008 2007

£’000 £’000

At 1 April 2007 1,657 1,617

Net sale proceeds recycled 650 689

Interest accrued 108 91

Major repairs and works to existing stock (637) (740)

Balance at 31 March 2008 1,778 1,657

Amount due for repayment to Housing Corporation 366 610

Grants from the Recycled Capital Grant Fund and Disposal Proceeds Fund are used to build more affordable homes

and to meet local and regional housing priorities. On larger schemes use of the funding offers better value for money;

therefore less is then required from central government.



20. Debt analysis


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Due within one year:

Bank overdraft 882 1,144 882 1,144

Bank loans – – – –

Royal Bank of Scotland (originally the Housing

Corporation) loans 38 50 – –

Other loans 5,000 5,000 – –

5,920 6,194 882 1,144

Due after more than one year:

Bank loans – – – –

Royal Bank of Scotland (originally the Housing

Corporation) loans 5,966 6,004 – –

Barclays Bank 236,500 146,118 – –

Nationwide Building Society 195,000 138,000 – –

HACO – – – –

Other loans 1,410 1,417 – –

Capitalised costs (1,962) (1,861) – –

436,914 289,678 – –

Loans are repayable as follows:

Within one year 5,920 6,194 882 1,144

Between one and two years 42 38 – –

Between two and five years 154 138 – –

After more than five years 438,680 291,363 – –

444,796 297,733 882 1,144

As at 31 March 2008, East Treasury Limited (a member of East Thames Group Limited) had arranged total loan

facilities of £450m. These facilities included a £200m loan with Nationwide Building Society and a £250m loan with

Barclays Bank Plc. The £150m loan agreed in 2005-06 was refinanced with Barclays in January 2008 and the total

Barclays facility extended to £250m.

During 2007-08, East Treasury Limited utilised an additional £147.5m of loans and as at 31 March 2008 had

borrowed £436.5m in total. These loans have been on lent to East Homes Limited and have been utilised primarily

to fund development activities and other business initiatives.

Fixed rate loans on lent from East Treasury total £181.5m, with interest rates ranging from 4.12% to 4.48%. East

Homes Limited has a further £7.4m of fixed rate loans with rates ranging from 9.5% to 10.75%. In total fixed rate

loans account for £188.9m, 42.5% of the total £444m loan portfolio. Variable rate loans represented 57.5% of the

total loan book with interest rates linked to LIBOR, which varied from 5.63% to 7.1% in the year.

The consolidated loan of £5.8m from the Royal Bank of Scotland and the NatWest Financial Markets £250k loan

(originally the Housing Corporation) are repaid in half-yearly instalments over the estimated life of the schemes on

which the loans are secured at a fixed rate of 10.65%. The final instalments are due for repayment in the period 2006

to 2037.

The £1.25m THFC Bond is fixed at 12.97% and is due to be repaid in 2019.



20. Debt analysis, continued

SWAPS agreements have been entered into with Lloyds, Barclays and Abbey to manage the risk associated with the

level of floating interest rate loans. As at 31 March 2008 SWAPS to the value of £200m have been taken out and

appropriate management controls are in place to manage the SWAPS and monitor interest rates. The fair values of

the interest rate SWAPS have been determined by reference to prices available from the markets on which the

instruments involved are traded. As at 31 March 2008, the fair value of the SWAPS totalled £2.5 million.

All loans are secured through the Prudential Trust by fixed charges on individual properties owned by East Homes Limited.

21. Annual obligations under operating leases

Group Group

2008 2007

£’000 £’000

Operating leases on land and buildings which expire:

Within one year 1,256 1,685

In the second to fifth years inclusive 3,648 2,762

Over five years 1,614 1,780

22. Provision for liabilities


2008 2007 2008 2007

£’000 £’000 £’000 £’000

At 1 April – 100 – –

Transfer from income and expenditure account 1,767 (100) 334 –

At 31 March 1,767 – 334 –

Comprising:

Dilapidation fund 100 – – –

Change management 1,667 – 334 –

1,767 – 334 –

The dilapidation fund will be used for property improvements at the Lavendar Road project, leases run until 2015.

Change management costs relate to expected costs from the outcome of the current restructure within East Thames

Group. Total costs comprise settlement of redundancy payments and other statutory obligations to be paid to staff

affected by the restructure. It is intended that the review will be finalised within the next financial year.

23. Non-equity share capital

2008 2007

£ £

Shares of £1 each issued and fully paid

At 1 April 2007 44 47

Shares issued during the year 13 –

Shares surrendered during the year (1) (3)

At 31 March 2008 56 44

The shares provide members with the right to vote at general meetings, but do not provide any rights to dividends,

redemption of share capital or distribution on winding up.



24. Reserves

Revaluation Restricted Designated Consolidated Revenue Total

GROUP £’000 £’000 £’000 £’000 £’000 £’000

At 1 April 2007 224,386 99 3,011 263 51,703 279,462

Prior year restatement – (77) (33) (263) 653 280

At 1 April 2007 restated 224,386 22 2,978 – 52,356 279,742

Surplus for the year – – – – 1,365 1,365

Property revaluation adjustment (4,367) – – – – (4,367)

Transfers (1,391) 90 (2,067) – 3,368 –

Utilisations – – (911) – – (911)

At 31 March 2008 218,628 112 – – 57,089 275,829

PARENT Restricted Designated Revenue Total

£’000 £’000 £’000 £’000

At 1 April 2007 – – 6,001 6,001

Surplus for the year – – (48) (48)

Transfers – – – –

Utilisations – – – –

At 31 March 2008 – – 5,953 5,953


2008 2007 2008 2007

£’000 £’000 £’000 £’000

restated

Restricted reserves comprise:

Donations 79 – – –

Gift Aid – – – –

East Potential 33 22 – –

112 22 – –


2008 2007 2008 2007

£’000 £’000 £’000 £’000

restated

Designated reserves comprise:

Major repairs schemes funded under 1988 legislation – 2,067 – –

Development – borough specific – 911 – –

Gift Aid – – – –

– 2,978 – –

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.



24. Reserves, continued

The surplus on ordinary activities this year of £3.0 million and the positive movement on reserves of £3.4 million were

added to the reserves brought forward of £52.3 million resulting in £58.7 million being carried forward.

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 2008 the Group’s reserves were all used in financing investments in

social housing.

25. Financial commitments

Group Group

2008 2007

£’000 £’000

Capital Commitments

Expenditure contracted for but not provided in the accounts 101,609 167,920

Expenditure authorised by the Board but not contracted for 34,442 39,495

136,051 207,415

This expenditure will be funded from loan facilities (52%), which are in place at the date of signing the accounts and

from Social Housing Grant (48%).

26. Contingent liabilities

The Group had no contingent liabilities at 31 March 2008 (2007: £ Nil).

27. Reconciliation of operating surplus to operating cashflows


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Operating surplus 5,998 8,129 (48) 888

Depreciation of fixed assets 2,431 2,246 2,181 964

Write off of abortive costs 401 877 – –

Sales allowances (208) (283) – –

Net increase/(decrease) in provisions 1,844 42 334 –

10,466 11,011 2,467 1,852

Movement in Working Capital

Decrease in investments – – – –

Decrease/(increase) in stock 895 6,410 – –

Decrease/(increase) in debtors (16,664) 3,223 18,103 27,370

Increase/(decrease) in creditors 7,064 (1,423) (16,372) (16,202)

Net cash inflow/(outflow) from

operating activities 1,761 19,221 4,198 13,020



28. Reconciliation of net cash flow to movement in net debt


2008 2007 2008 2007

£’000 £’000 £’000 £’000

Increase/(decrease) in cash in the period (1,257) 3,001 262 2,132

Cash inflow from increase in debt and

lease financing (145,447) (45,896) – –

Cash outflow from loan issue costs 189 1,020 – –

Change in net debt resulting from cash flows (146,515) (41,875) 262 2,132

Change in net debt resulting from non cash flows (88) (72) – –

Change in net debt from acquisitions

(excluding overdrafts) (1,878) – – –

Net debt at the start of the period (287,673) (245,726) (1,144) (3,276)

Net debt at the end of the period (436,154) (287,673) (882) (1,144)

29. Analysis of net debt

Acquisitions

(excluding Other

2007 Cash flow overdraft) changes 2008

Group £’000 £’000 £’000 £’000 £’000

Cash at bank and in hand 8,199 (1,519) – – 6,680

Bank overdraft (1,144) 262 – – (882)

7,055 (1,257) – – 5,798

Loans due within one year (5,050) 1,890 (1,878) – (5,038)

Loans due after more than one year (291,539) (147,337) – – (438,876)

Capitalised loan issue costs 1,861 189 – (88) 1,962

(287,673) (146,515) (1,878) (88) (436,154)

Acquisitions

(excluding Other

2007 Cash flow overdraft) changes 2008

Parent £’000 £’000 £’000 £’000 £’000

Bank overdraft (1,144) 262 – – (882)

East Thames Group Limited Financial Statements

Our missionTo make a positive and lasting contribution to the neighbourhoods in which we work.

Our key aimsWe deliver on our mission by:1 providing high quality homes and services that meet the needs of our customers;2 ensuringthatourcustomerscaninfluenceourservices;3 influencinglocal,regionalandnationalthinking,policies and strategies;4 developingwell-informed,committedandenthusiastic staff; and5 activelyusingourfinancialandorganisationalstrength.

Our valuesInachievingourmission,wewillbedrivenbyourfourcorebusiness values.

We will be customer focused:

• responding to what our customers say;

• providing excellent and reliable services; and

• enabling customer choice.

We will be ambitious:

• creating new approaches to service delivery;

• producing excellent outcomes; and

• striving for excellence in everything we do.

We will be professional:

• being straightforward in everything we do;

• adoptingaflexibleapproachtodeliveringservices;

• demonstrating a respectful approach to our customers; and

• beingopen,reliableandconsistent.

We will be leaders:

• empowering our staff to act responsibly;

• showing creativity in service provision;

• inspiring those who work with us; and

• campaigning on key issues.

Registered Office:29-35 West Ham LaneLondon E15 4PH

Switchboard: 020 8522 2000Minicom: 020 8522 2006Fax: 020 8522 2001

www.east-thames.co.uk

RegisteredbytheHousingCorporation,No.LH4309

RegisteredundertheCompaniesAct1985,No.4091100

Registeredcharity1084952

MemberoftheNationalHousingFederation

Published by East Thames Group Limited

group accounts 2008

Documents

board report

members mr

group company secretary

board operating

report andfinancial

boardthe board

concernthe board

treasurer mr c