group accounts 2008
DESCRIPTION
Financial statements for the year ended 31 March 2008TRANSCRIPT
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
financial statements.
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:
East Thames Group Limited Financial Statements 3
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.
4 East Thames Group Limited Financial Statements
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 Financial Statements 5
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.
6 East Thames Group Limited Financial Statements
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
East Thames Group Limited Financial Statements 7
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%
8 East Thames Group Limited Financial Statements
OPERATING AND FINANCIAL REVIEW, continued
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.
East Thames Group Limited Financial Statements 9
OPERATING AND FINANCIAL REVIEW, continued
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.
Performance in 2007-08
• 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.
Performance in 2007-08
• 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.
10 East Thames Group Limited Financial Statements
OPERATING AND FINANCIAL REVIEW, continued
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.
Performance in 2007-08
• 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.
Performance in 2007-08
• 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.
East Thames Group Limited Financial Statements 11
OPERATING AND FINANCIAL REVIEW, continued
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.
12 East Thames Group Limited Financial Statements
OPERATING AND FINANCIAL REVIEW, continued
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).
East Thames Group Limited Financial Statements 13
OPERATING AND FINANCIAL REVIEW, continued
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%).
14 East Thames Group Limited Financial Statements
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
financial statements.
East Thames Group Limited Financial Statements 15
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
16 East Thames Group Limited Financial Statements
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 Financial Statements 17
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
18 East Thames Group Limited Financial Statements
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 Financial Statements 19
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
20 East Thames Group Limited Financial Statements
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
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 Financial Statements 21
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
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
22 East Thames Group Limited Financial Statements
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 Financial Statements 23
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.
24 East Thames Group Limited Financial Statements
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.
East Thames Group Limited Financial Statements 25
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
26 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
East Thames Group Limited Financial Statements 27
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
28 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
East Thames Group Limited Financial Statements 29
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
Group Group Parent Parent
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% – –
30 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
Group Group Parent Parent
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
Group Group Parent Parent
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
East Thames Group Limited Financial Statements 31
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
32 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
8. Employees, continued
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.
East Thames Group Limited Financial Statements 33
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
8. Employees, continued
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.
34 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
8. Employees, continued
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.
East Thames Group Limited Financial Statements 35
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
8. Employees, continued
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.
36 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
East Thames Group Limited Financial Statements 37
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
38 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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)
– –
East Thames Group Limited Financial Statements 39
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
40 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
East Thames Group Limited Financial Statements 41
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
14. Debtors
Group Group Parent Parent
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
Group Group Parent Parent
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.
42 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
17. Creditors: amounts falling due after more than one year
Group Group Parent Parent
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
Group Group Parent Parent
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 – – –
Group Group Parent Parent
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 – – –
East Thames Group Limited Financial Statements 43
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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.
44 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
20. Debt analysis
Group Group Parent Parent
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.
East Thames Group Limited Financial Statements 45
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
Group Group Parent Parent
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.
46 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
Group Group Parent Parent
2008 2007 2008 2007
£’000 £’000 £’000 £’000
restated
Restricted reserves comprise:
Donations 79 – – –
Gift Aid – – – –
East Potential 33 22 – –
112 22 – –
Group Group Parent Parent
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.
East Thames Group Limited Financial Statements 47
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
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
Group Group Parent Parent
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
48 East Thames Group Limited Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2008, continued
28. Reconciliation of net cash flow to movement in net debt
Group Group Parent Parent
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