Financial Statements - MVHomes · renovations of Taf Fechan House and to create a new Housing...

Year ended 31 March 2016

Financial Statements

www.mvhomes.org.uk

2

Contents

Board Members, Executive Officers and Professional Advisors .................3-4

Strategic Report.......................................................................................................5-20

Board Report ............................................................................................................21-24

Independent Auditor’s Report to the Members .............................................25-26

Statement of Comprehensive Income ...............................................................27

Statement of Financial Position...........................................................................28

Statement of Changes in Reserves .....................................................................29

Statement of Cash Flows .......................................................................................30

Notes to the Financial Statements ......................................................................31-63

www.mvhomes.org.uk

3

Board Members, Executive Officers and Professional Advisors Board Members to 1 May 2016

Council Board Members: Bill Smith Howard Barrett Tom Lewis Chris Barry Tenant Board Members: Frances Bevan (Vice Chair) Kevin Eddy Bernadette Batson – resigned June 2015 Olaf Rebane – resigned October 2015 Tracey Powell – appointed January 2016 Marlene Burns – appointed January 2016

Independent Board Members: Nicola Evans (Chair) David Lewis Martin Jones Stephanie Howarth Co-optee: John Chown

Board Members from 1 May 2016

Independent Board Members: Nicola Evans (Chair) John Chown (Vice Chair) David Lewis Martin Jones Stephanie Howarth Carol James Marc Fury Elizabeth Lendering

Executive Officers: Michael Owen (Chief Executive) Lorraine Oates (Director of Finance and Resources) Victoria Slade (Director of Housing) Paul Allen (Director of Asset Management)

Registered Office: Martin Evans House Riverside Court Avenue de Clichy MerthyrTydfil CF47 8LD

www.mvhomes.org.uk

4

Board Members, Executive Officers and Professional Advisors (cont.) Area Office: Johnny Owen Centre Forsythia Close MerthyrTydfil CF47 9DS

Independent Auditor: Mazars LLP Chartered Accountants 45 Church Street Birmingham B3 2RT

Internal Auditors: Barcud Shared Services Valleys to Coast Ltd Tremains Business Park Tremains Road Bridgend CF31 1TZ

Solicitors: Trowers and Hamlins LLP Sceptre Court 40 Tower Hill London EC3N 4DX

Bankers: National Westminster Bank Plc Heads of the Valleys Branch 122 High Street MerthyrTydfil CF47 8BN

Funders: The Royal Bank of Scotland plc Global Banking and Markets Housing Finance 7th Floor 135 Bishopsgate London EC2 3UR

Merthyr Valleys Homes Limited is a registered society under the Co-operative andCommunityBenefitSocietiesAct2014.Registrationnumber30532R.Registered with the Welsh Government as a Registered Social Landlord. Registration number L150

Principality Building SocietyPO Box 89Principality BuildingsQueen StreetCardiffCF10 1UA

www.mvhomes.org.uk

5

The Board present their Strategic Report on the affairs of Merthyr Valleys Homes Limited (MVH), together with the financial statements and auditor’s report, for the year ended 31 March 2016.

Legal StatusMVH is established and registered under theCo-operativeandCommunityBenefitSocieties Act 2014 and is a Registered Social Landlord, registered with the Welsh Government. MVH has adopted charitable rules.MVHisanot-for-profitorganisationadministered by a voluntary Board of Management.

Principal activities and objectivesMVH owns, manages and maintains 4,182 rented homes, including 206 units of sheltered accommodation, located within theCountyBoroughofMerthyrTydfil.Wealso own or manage 630 garages, 39 retail unitsand12co-operativehousingflatsand provide management services to 288 leasehold properties.

Our Corporate Strategy was adopted in 2012 and set our goals and objectives from2013throughto2016.Itidentifiedour priority as being to provide excellent housingandrepairservicesandidentifieda central role for MVH in regenerating our neighbourhoods.

We set out goals for working with our tenantsourstaffandourcommunityin“livewith us; work with us and improve with us”.

Strategic Report Year ended 31 March 2016

To achieve this, our strategic goals are to:•Createahousingservicethatisexcellent•Puttenantsattheheartofourorganisation•Createafairercommunity•Haveaproudandproductiveworkforce•Workwithsocialenterprises•Supportlocaldemocracy•Createqualityhomes•Improveourneighbourhoods•Improveeconomicinequality

To support the strategic goals in our Corporate Strategy, we also need to ensure that we:•Havetherightfinances•Havetherightgovernancestructures•Managetherisksinachievingourvision

Our Corporate Strategy has come to its natural end and will be reviewed in line with our transition to a mutual organisation during 2016/17.

www.mvhomes.org.uk

6

Financial PerformanceThe2015/16financialstatementsarethefirsttobepreparedunderFRS102,theFinancial Reporting Standard applicable in the United Kingdom and Ireland (‘FRS102’) and a new Housing Statement of Recommended Practice – Housing SORP 2014, Statement of Recommended Practice for Registered Social Housing Providers (‘SORP 2014’). This has led to some significantchangestotheformatofthefinancialstatements,includingnewnamesfor our primary statements. Our accounting policies have also been revised in line with FRS102. The impact of these changes is set out in Note 32.

Statement of Comprehensive IncomeTurnover increased by £0.754m or 4% to £17.681m. Rental income is the largest income stream, representing 98% of turnover. The increase in rental income reflectstheagreed2.7%guidelinerentincrease issued by the Welsh Government and the convergence of hundreds of rents to just 10 rent levels – full convergence will take many years. Other income doubled compared to the prior year, mainly from the sale of 24 Right to Buy properties (2015:14 properties sold).

The operating surplus fell by £0.352m to £2.276m and our operating margin decreased from 16% to 13%. This was expected, with higher than usual management costs from a combination of a temporary increase due to the development of a new Housing Management system and changing the governance structure of the organisation to a mutual; a large pension adjustment and increased levels of depreciation due to the transition to FRS102.

Bad Debts and Void LossBad debts and voids as a percentage of gross rent receivable fell by 0.65% in 2016. The reduction in void losses is a result of the investment made in turning around void properties during the year from 103 at 1st April 2015 to 42 at 31st March 2016.

Rent ArrearsThe cumulative rent arrears (current and former) fell by £0.124m, from £0.678m at 1st April 2015 to £0.554m at 31 March 2016. Current arrears fell by £0.118m, from £0.476m at 1st April 2015 to £0.358m at 31 March 2016. Former tenant arrears fell by £0.006m from £0.202m at 1st April 2015 to £0.196m at 31 March 2016. We havebenefitedfromoneadditionalweek’sdirect debit totalling £35,000 from 2014/15 due to the timing of the receipt. We have more resources covering pre tenancy checks,freeingupofficerstoconcentrateon income collection. The introduction of the Rent Sense software, which went live in October2015,hasenabledamoreefficientway of chasing arrears.

Strategic Report


www.mvhomes.org.uk

7

Strategic Report


Fixed AssetsThe net book value of our housing stock was £52.346m at 31 March 2016. We invested £7.92m in capital improvements during theyearandthiswasoffsetby£3.219mofdepreciation charges which were higher as a result of adopting FRS102. A combination of internal cash balances and grant income from the Welsh Government (WG) has been used to fund the capital programme.

Total grant income was largely made up of Dowry Gap Funding of £2.9m and £0.429m Social Housing Grant funding for the new development of 6 properties at Honeysuckle Close. An independent valuation of the housing stock conducted by Savills based on Existing Use Value shows an increase in value from £69.589m as at 31 March 2015 to £72.499m as at 31 March 2016.

FRS102 also introduced a new class of asset, ‘Investment Properties’ which added £0.897m to our asset value from the valuation of the shops that we rent at market value.

Loans No new loans were drawn during the year from our lenders (RBS and Principality). Our loan balance at 31 March 2016 was £24m. Ofthis,£20mwasatfixedinterestratesand£4m at variable rates. The increase in Interest Payable on loans to £1.854m is mainly because of the change from variable rates to apre-agreedfixedratefor£10mofexistingborrowing (2015: £1.301m).

A loan of £510,000 was also provided by MerthyrTydfilCBCin2014/15tofundtherenovations of Taf Fechan House and to create a new Housing Co-operative during 2015/16.

Pension Fund AssetThe pension fund asset is based on the Actuary’s valuation as at 31 March 2016. The balance sheet shows an increase in the value of the pension fund asset of £1.323m to £4.860m. 2015/16’s employer’s pension contribution rate was 8.4%, compared to 10.5% in 2014/15. The triennial valuation has determined that our contribution rates will fall further, to 6.4% in 2016/17. This is an unusual situation to be in, compared with most employers operating the Local Government Pension Scheme (LGPS) who tend to have rising contribution rates to fund a scheme deficit.ChangestotheLGPShavespreadthe risk between employees and the employer.

Net AssetsThe overall net assets position at 31 March 2016 is £11.520m, compared to £6.979m at 31 March 2015. This is mainly due to the increase in the value of housing properties as a result of the major investment programme.

www.mvhomes.org.uk

8

Strategic Report


Our key achievements in 2015/16

SummaryThis was a momentous year for Merthyr Valleys Homes that has seen major changes. TheFinancialStatementsreflectourachievements in the last 12 months, looking firstattheorganisationandourplansforthe future and then breaking that down into more detail about our work and how it affectsourtenantsandcommunities.

We carried out an extensive evaluation of our Corporate Strategy in 2015/16 and are now in the process of writing a new strategy and vision for our new mutual. The evaluation concluded that by the end of the financialyearwehadachievednearlyeverytarget we set ourselves back in 2012.

Looking at some of the bigger achievements over the four years we have:•Become Wales’ first tenant and employee

mutual – we’ve reviewed all our governance and changed our organisation.

•Kept our transfer promises – we’ve agreed withourtenantsandwithMerthyrTydfilCBC that all the promises that could have been completed in the transfer promises document published prior to the ballot in 2009 have been completed.

•Been part of the renaissance of Merthyr Tydfil – in particular we’ve seen evidence of inward investment in to our estates and communities.

•Supported house price growth – in the neighbourhoodswemanagesignificantnumbers of homes have seen house prices rise at almost double the rate for the borough as a whole. This growth reflectsincreasedconfidencefollowingour investment and improved local management.

• Reduced the number of empty properties by over 60 – with lower crime and communityconfidencereturningweonly need security protection on empty properties in a handful of streets.

•Completed 27 new homes for rent – and returned 16 long term empty properties back into rented homes.

MVH: finance and governance•Weachievedalltherequisiteapprovals

to become a mutual organisation. The actual launch date for this was 1 May 2016. This was the culmination of an extensive change within the organisation tobecomeWales’sfirsttenantandemployee mutual. We established a representative commission from across our stakeholders to design the new rules for the organisation that were then adopted by Special General Meeting attended by hundreds of tenants and employees. ThelocalMPgavethefirstsymbolicmembershipcertificatestofourtenantsand employees. We received emails of support from across the UK and messages of support from AMs, the Welsh housing ministerLesleyGriffiths,thechiefexecutiveof Chartered Institute of Housing and local media celebrities like Jonny Owen.

•Weagainachieveda‘Pass’onourannualFinancial Viability Judgement from the WelshGovernment,whichconfirmswehaveadequateresourcestomeetcurrentandfuturebusinessandfinancialcommitments.

•Weout-performedourcashcovenantin2015-16 and have taken the opportunity to earmark some of this headroom for future use.

•Wecommencedtheinstallationofanewcustomer relationship management (CRM) system and successfully launched the firststagewiththedevelopmentofthesupported housing system.

www.mvhomes.org.uk

9


•Weinvolvedtenants,Boardmembers,unionsandstaffinourStarChamberbudgetsetting process. The result was £274,000 of savings to invest in a cyclical painting programme for previously unpainted properties with a long term aim of reducing maintenance costs. Our Board and tenants also came together to look at multiple risk stress testing of the business plan.

MVH: Future developmentsWe have already started designing our new future as a mutual and we will have a new Corporate Strategy in place by the autumn. This is being co-produced by tenants and employees looking at the issues coming up includingthefinancialpressuresfromLocalHousing Allowance and Universal Credit.

As part of redesigning the organisation, we will be shortly opening tenders for our £3mnewheadofficeinGellideg.ThisnewofficewillhelpregeneratethecentreoftheGellidegareaandwillforthefirsttimebringall our employees into one location. This is a chance to revisit and improve working practices and communications. This new operating environment will be mirrored as we become customer focused with the completion of the new CRM system.

We are also in the process of establishing our own Grounds Maintenance Team that we believe will improve upon and will be cheaper than the current out-sourced service. We have already recruited and we are in the planning and training phase ready to go live in July 2016.

Live with us, work with us, improve with usThe rest of this document looks in detail at our work under the heading of the three themesweidentifiedinourCorporateStrategy in 2012.

Live with us We’ve worked hard to support our tenants and communities during the year with a wide range of new initiatives and continuing activities:• Tenant satisfaction – the satisfaction

rating in our all-tenant survey again improved to 84%. The survey also gave us lots of areas to work on including tackling rubbish and litter.

• Rubbish and fly tipping – in response to increased concern of our tenants we created an Environmental and Neighbourhood Team to concentrate on environmental issues throughout our estates, including a ‘tidy up’ service that manageswasteandflytipping.Thishashad a great impact on the appearance of our schemes and estates.

• Taf Fechan Housing Co-operative – one ofthefirstnewco-operativesinWaleswent into management. This innovative and grant free scheme houses a group of 12 young people in a refurbished block of flatsthatwasduefordemolition.

• National Customer Services Week – this washeldinOctober2015forthefirsttimein Merthyr Valleys Homes. We talked to and surveyed lots of tenants using our service during the week with some great results and some ideas for doing things in differentways.

• Sheltered housing service – we received excellentfeedbackfromMerthyrTydfilCouncil’s Supporting People Team who carried out a review looking at policies, procedures and consulting with service usersandstaff.

Strategic Report

www.mvhomes.org.uk

10


• Let’s Keep on Supporting People – this campaign was launched all over Wales to save Supporting People funding. As a result, funding remained in place with no cuts for the next 12 months.

• Disability and Wellbeing Focus Group – we expanded and developed the group with 11 tenants working to promote services for disabled tenants and developing their own online newsletter.

• Resources, Information, Support and Engagement Project (RISE) – we introduced the project that has provided support to 122 tenants to optimise their employment, health, learning and income maximisation opportunities by sign-posting or referring them to the relevantinternalorexternalofficers.

• Perthyn Project – we worked with younger and older people as part of the project to consult on four key housing policies and service areas (including anti-social behaviour, housing allocation and future housing standards). Weproducedafilmhighlightingthesimilaritiesanddifferencesbetweenhousing past and present.

• Universal Credit – 12 of our tenants wereaffectedbyUniversalCreditandalthough this has been challenging we have secured a collection rate of 82%.

• Low demand – we implemented new ways of advertising our hard to let/ low demand properties, including nominationrequeststoMerthyrTydfilCouncil’sHousingSolutionsand Homelessness Departments, local lettings posters (3Gs/Gellideg Foundation) and registering properties on Homeswapper and Gumtree.

• Awards for young people – we established an award system for young people growing up in our properties who have made a successful achievement at national or international

level. We awarded two grants, one to a footballer who represented Wales in under-16 football and the other to the under-16 and under-18 Welsh boxing champion.

Live with us: Our tenants•Wehandled43,284callsfromtenants

between April 2015 and March 2016.•Wenowhavetenancyprofilinginformation

for over 95% of our tenants, which allows us to shape our services accordingly.

•Wemanagedover422differentbreachesof tenancy

•Weprovidedincome/benefitmaximisationadvice to 547 households during 2015/16 resulting in an average increased income ofover£11.81perweekwhichisequivalentto £614 per year on average.

•Wehaveencouragedmoredirectdebitpaymentsthisyearbecausewenowofferany day collection. This has increased the number of direct debit payers from 855 in 2014/15 to over 1,200 in 2015/16. This gives us more certainty over our rent collection and it is a cheaper method of collection for MVH.

•Wesupportedover1,000tenantstoensuretheirHousingBenefitclaimsarepaidand recovered over £106,000 of unpaid HousingBenefit.

•Wearrangedregularfinancialchecksforpotential under-occupiers and European Economic Area (EEA) families and assisted families with urgent management transfers.

•Newtenantshadthechancetocompletea ‘Money for Life’ awareness session to increase tenancy sustainability.

•Wehavecarriedout335pre-tenancyassessmentstoidentifybothfinancialandother support needs.

•Weprovidedmajoradaptationsin67homes to make life easier for those households.

Strategic Report

www.mvhomes.org.uk

11

•WecontinuedtodeveloptheEqualityandDiversity Focus Group and carried out a numberofEqualityImpactAssessmentstoensure that policies and procedures that affecttenantsaredeliveredinawaythatisequalforall,regardlessoftheirneeds.

Live with us: Our communities•Weheldfivecommunityclearancedays

across the borough giving tenants the opportunity to dispose of bulky items forfreeandavoidfly-tippingwithintheircommunities.

•Weundertookcommunalloungerefurbishments at two sheltered schemes (Horeb Close and Haven Close) and they now look lovely.

•WeofferedtrainingonITsessionsfortenants at three of our sheltered schemes.

•WefundedtheexpansionofTrelewisCommunity Garden, which now includes additional growing beds, fencing and disabled access walkways and continued to support community garden groups at 3 of our Sheltered Schemes. We also provided free Grow Your Own garden packs to 33 tenants.

•WeareworkinginpartnershipwithVictimSupport who provides support to victims of ASB and crime. The partnership includes regular attendance by a Victim Support FocusOfficertodiscusscases.

•Wecontinuedtousearangeofmeasuresto tackle ASB and worked closely with the Council and South Wales Police. Prevention and early intervention are our goals but occasionally the community needs protecting and on 8 occasions we used ASB injunctions, 1 household had a demotedtenancyandfinallyweevicted4other households.

•WeorganisedaHateCrimeAwarenessdisplay in our reception area during National Hate Crime Awareness Week.

Work with usOur investment helps create jobs and training opportunities in the community and to support local businesses:• The local economy – we spent £14.168

million with local contractors. This represents over 70% of our expenditure and we also spent a further 10% of our money in Wales.

• Social enterprises – in September 2015, we won an award at the Social Enterprise Awards Wales event and went on to win a prestigious national award at the National Social Enterprise Awards UK. We have continued to support and work with local social enterprises, including the Gellideg Foundation and MerthyrTydfilInstitutefortheBlind.

• Work experience – we provided placements to 14 people plus volunteering opportunities throughout our organisation during the year.

• Jobs Growth Wales – we have continued to support the programme and as a result we have employed two local people.

• Disabled people – following a review, we have maintained our Positive about Disabled People accreditation.

• Training – we launched an E-learning system,whichhasledtoacosteffectiveway of delivering mandatory training suchasequalityanddiversityanddataprotectiontoallstaff.

• Looking for work – we provided some tenants with CV writing, job searches and interview skills training and launched an E-Learning course which is accessible to tenants from any internet connection at any time.

Year ended 31 March 2016Strategic Report

www.mvhomes.org.uk

12


Improve with usWe continue to press ahead with work to improve our estates and homes: • Empty homes – MVH spent £1.6 million

on void properties and the total number of voids was reduced from 103 at the beginning of the year to 42 at the end of the year, generating additional rental income. We reduced the number of policy voids to 8 at 31 March 2016.

• Reactive repairs – we carried out over 13,000 repairs during the year (of which, just over 4,400 were emergencies where we complete the repair on the day that it is reported to us)

• Planned refurbishment programmes – we carried out a range of improvements in our tenants’ homes including:

¸ 86 new kitchens ¸ 85 new bathrooms ¸ 189 electrical rewires ¸ 271 new central heating systems ¸ 382 new roofs ¸ 111 new window installations ¸ 235 new door installations ¸ 359 properties painted ¸ 204 properties having external wall

insulation• Upper Gurnos Regeneration Project –

37 properties were improved in addition to environmental improvements to roads and street lighting with good levels of satisfaction being reported by tenants.

• Sunnybank, Merthyr – the major refurbishment of all properties on this estate was completed. This project has run for 3 years and it is a major achievement, making the properties more energy efficientandsafer.

• Improvements in flats – we upgraded the door entry systems in three of our blocks and installed sprinkler systems and other fireequipmentandprotectionintwomore blocks, protecting our tenants and leaseholders.

www.mvhomes.org.uk

13

Value for Money (VFM) StatementWe adopted 8 Golden Rules for Value for Money in 2014. The 2015/16 results are shown below.

RULE 1 – To understand our services in terms of cost, quality and performance against our peer group and seek to improve

We have presented our performance in two ways,firstlythroughourinternal,corporateKey Performance Indicators (KPIs) which are monitoredbytheBoardonaquarterlybasisand through themed reports. The second method is the comparison to our peers, which we obtain through an independent Benchmarking Club – Housemark. These results are audited by Housemark to ensure consistency in the way all Registered Social Landlords present their information.

Key Performance Indicators (KPIs) 2015/16Merthyr Valleys Homes reported the following Key Performance Indicators for 2015/16.

Rent arrears for 2015/16Performance for all of the income collection KPIs was on target at the year end, which is a creditable achievement in light of welfare reformandthecurrentfinancialclimate.The team is using RentSense software to helpbettertargettheirtimeandeffortsforintervention and recovery, which is balanced by more up-front support and assistance fortenantsaffectedbywelfarereforms.Theteam has also used the last 12 months to review every former tenant arrear case to secureafinalsettlementorwriteoff.Manywere historic cases with no realistic prospect of recovery. The next 12 months will be about building on this level of performance, and keeping a careful eye on caseload for Universal Credit cases.

Empty Home Rent Loss PercentageRentlossoccurswhenpropertiesrequirerepair and/or improvement before they can bere-let.Theamountofrentlostreflectsthe number of days a property is empty, whichforusfluctuatedbetween44and91 days during 2015/16. The target of 2% wasmetduringtheyearandreflectstheconsiderable amount of work put into the void management process during the year.

Average Time Taken to CompleteEmergency RepairsThe overall performance for completion intargettimewasaffectedforthewholeyear by below target performance in the firstquarterof2015/16.Theteamworkedhard during the year to make sure that only genuine emergencies were picked up in this category, reducing the number and pull on resources, and that paperwork to show a job as completed was provided in a timely way. The target was missed as a result of a continually high percentage of jobs recorded as emergency – 33%. All jobs were actually attended and made safe within the target time.


KPI2015/16Target

2015/16Actual

Rent Arrears for 2015/16 3% 2.13%

Empty Home Rent Loss Percentage

2% 2%

Average time taken to complete emergency repairs in days

0.5 0.82

Average time taken to complete urgent repairs in days

5 2.92

Average time taken to complete routine repairs in days

28 42.22

Percentage of properties with a valid landlord gas safety record

100% 100%

www.mvhomes.org.uk

14

Average Time Taken to CompleteUrgent RepairsFollowing a review of our repairs service, involving consultation with tenants, the service standard target for this was raised to 5 days, in line with the wider Housing Sector. This was comfortably met during the year.

Average Time Taken to CompleteRoutine RepairsWe are completing more routine repairs within target time than in previous years. Tackling the backlog of these repairs, which had built up, was a priority during 2015/16. Systems were put in place to make sure that the backlog was checked for relevance and priority, any health and safety issues addressed. This included site audits and inspections and a method to batch jobs into mini-programmes. We completed a number of old jobs towards the end of the year which impacted on our overall target time.

Percentage of properties with a validlandlord gas safety recordWe have once again achieved a 100% record on this indicator

Housemark BenchmarkingWe have been a member of Housemark’s Benchmarking Club for several years. Housemark developed a Value for Money (VfM)scorecardlastfinancialyear,reflectingVfMacross4categories,theseare:-a. Poor performance/low cost –

sometimes performance relates to events which are beyond our control. Low cost is generally considered good.

b. Poor performance/high cost – the worst position for any organisation – strongly indicates that change is needed.

c. Good performance/high cost – whilst not ideal, sometimes it is necessary to invest in service provision.

d. Good performance/low cost – this is the ideal position.

The following Table provides an overview of our progress from 2012/13 to 2014/15 (the latest available data). The analysis gives an indication of where we think our performance will be when the 2015/16 information is published.


www.mvhomes.org.uk

15


VfM Measure Analysis

Responsive Repairs and Void Work

The age and condition of our housing stock has meant that we are consistently in the high cost category for the 3 years to 2014/15. Performance is also rated as poor, generally because of the average number of days to complete repairs. Whilst this is disappointing, we have improved our response times and satisfaction with the service also increased in 2015/16.

Rent Arrears and Collection

We have consistently been classed as poor performance/high cost for this activity. It is no surprise, given that Merthyr was one of the top ten hardest hit communities following the Government’s Welfare Reforms. Our performance hasimprovedin2015/16andhopefullythiswillbesufficienttomoveusintoHousemark good performance category for that year.

Anti-Social Behaviour

This service has always faired well in cost terms. Performance has improved since 2012/13 i.e. since we’ve had a specialist team. This service sits between the good performance/high cost category in 2014/15, a direct result of finalisingsomelong-standingissueswhichhaveprovedcostlybutinreturnhavehadapositiveeffectonourestates.

Major Works and Cyclical Maintenance

The amount of capital investment needed to bring our homes up to WHQS meant that MVH was not going to achieve low cost/good performance for many years post transfer. We have improved our performance and we are now in the good performance/high cost category for 2014/15.

Lettings The cost of this service has always ensured that we fall into the low cost category however performance has consistently been classed as poor due to the volume of properties becoming vacant and the growing number of empty properties between 2012/13 and 2014/15 and the average number of days they are empty. We have made some strategic decisions to tackle this problemin2015/16i.e.concentratingontheoldestvoidsfirst;tighteningupour criteria for tenants to transfer between our homes; investing in reducing the number of empty properties and improving our voids process. We have achievedagreatdealin2015/16andwehopethatthiswillbereflectedinourHousemark results for 2015/16.

Tenancy Management

Our costs for this service are consistently low however our tenancy turnover has been consistently high, placing us in the low cost/low performance category. Tenancy turnover has reduced in 2015/16 i.e. a 14% drop in the number of properties becoming vacant during the year, which should help us move towards good performance for that year.

Resident Involvement

This VfM measure has consistently appeared as good performance/high cost over the 3 years’ results. We have invested in this service in order to put our tenants at the heart of our decision making and therefore we do not anticipate any change in 2015/16’s results.

Estate Services

Performance has improved since 2012/13, with this service consistently in the good performance/low cost category.

www.mvhomes.org.uk

16

RULE 2 – To set our budgets in line with corporate priorities; challenge our costs and where possible work collaboratively

We set the 2015/16 budget with a panel of tenants,staffandtradeunionmembers,helping to secure savings of £274,000 so that we could increase our painting programme to include previously unpainted properties into our cyclical painting programme.

MVH is part of a consortium of Large Scale Voluntary Transfers (LSVTs) who run a shared internal audit service – Barcud Shared Services. This service delivers added value by sharing good practice and benchmarking with each other along with joint service reviews.

RULE 3 – To increase our bottom-line surpluses – to re-invest into new homes and regeneration projects

Our operating surplus is £2.276m for 2015/16, a reduction of £352,000 from 2014/15. This was expected, with higher than usual management costs comprising a large pension adjustment; a temporary increase due to the development of a new Housing Management system and changing the governance structure of the organisation as well as increased levels of depreciation due to the transition to International Financial Reporting Standards.

Our overall surplus for the year was £907,000 more than 2014/15. This was mainly due to the sale of 24 properties in 2015/16 compared with 14 properties sold in 2014/15. This has led to lower than expected loans outstanding at the year end andalargesurplusagainstourcashflowcovenant. This has allowed us to set up an internal reserve of £1.837m for use in future

years, enabling further investment into new housing and community regeneration for 2016/17 and 2017/18.

We have built 6 new homes in 2015/16 and returned a further 8 long term empty properties to rental through Taf Fechan Co-Operative.

RULE 4 – To include community benefits as part of every contract tendered

We have a contractor framework that covers all our repairs and maintenance work. The majority of our contractors are local businesses and through our contract they have enabled the following to be achieved in 2015/16:-•Employed/retained29permanent

employees.•Supported8workplacements.•Attracteda£2,000donationofmaterials

from Jasonic to 3Gs to refurbish the Gurnos Clinic into a training centre.

•AWelfareUnitforourPropertyServicesTeam was installed in Trelewis Community Centre using kitchen units donated by Jasonic.

•JasonicdonatedsinksandbathstoPantPrimary School as planters.

•JasonicsupportedMVH’s2communitydays on Gurnos Estate, providing food and equipmentforustotidyuptheestate.

•Rabartsdonated40litresofCrownpaintfor our community day, along with brushes and t-shirts.

•VPSprovidedatippertruckandfreelabourto work with us on our community day.

•SolarWindowshaveparticipatedinsomemock interviews in Merthyr schools to help improve pupils’ chances of employment.

•SRBuildershavecontributedcashandin-kind donations to social enterprises identifiedbyMVH.


www.mvhomes.org.uk

17

Other contracts have secured the following communitybenefits:-•Wehavesupported8employmentand

training placements through our grounds maintenance contract with Gellideg Foundation Group.

•WewonaUKawardforbuyingfromSocialEnterprises.

Asidefromcontracts,MVH’sstaffawaydaywas spent tidying up the Gurnos Estate. This meant that we spent approximately 630hoursremovinglitterandflytippingand painting fences, making a considerable differencetotheestate.Thisdaywassupported by our contractors.

We donated a plot of land to the Gellideg Foundation Group so that they can build a well-being centre for the community. The landplusournewheadofficedevelopmentgenerated much needed match-funding against the Local Authority’s Vibrant and Viable Places grant to enable the Foundation to develop their long awaited well-being centre.

The Grant and Sponsorship Panel awarded £40,000 to local groups. These groups provide important community networks and functions which otherwise may not be funded.

RULE 5 – To review all major areas of expenditure over £100,000 at least every 5 years

A review of our Grounds Maintenance contract was conducted during 2015/16. It recommended that we set up an in-house team to complement the contract we currently have with the Gellideg Foundation Group, commencing June 2016. This will support permanent employment and some trainee posts, rather than the service being

deliveredbyseasonalagencystaff.Weshould see savings of at least £60,000 p.a. as a result of this decision, from 2017/18 onwards.

RULE 6 – To ensure that customer satisfaction is not compromised for the sake of an efficiency

We want to improve the customers’ experience whenever they interact with us and therefore we have started to develop a new Customer Relationship Management system in 2015/16. This will allow us to dealwithqueriesconsistentlyandmoreeffectivelyaswellasgivingustheabilityto report on outcomes. Our Supported Housing function has been using CRM for some time and we are gradually developing this for other sections e.g. Rent Collection and Arrears. We have invested in resourcing this project so that frontline services are not affected.

One of our corporate objectives is to increase customer satisfaction to 87%. We reached 84% in our most recent STATUS survey (2015).This is an ambitious target considering the average customer satisfaction across the Welsh Housing Sector is currently also 84% (Source: Star Survey Community Housing Cymru 2015).

RULE 7 – To seek alternative, cheaper, more innovative sources of funding for capital projects and use our assets well

We secured a loan of £510,000 from MerthyrTydfilCountyBoroughCouncil(MTCBC) in 2014/15 at an all in rate of 2.92% to fund the Taf Fechan Housing Co-operative. The loan has been spent in full, refurbishing12flatstoleasetotheCo-operative. This has provided an alternative tenancy to social rented accommodation,


www.mvhomes.org.uk

18

allowing tenants to take responsibility for the maintenance of their home and to have a say in who lives in the block. This scheme hasbrought8flatsbackintocirculationwhich had been empty since the 1990s. The low,fixedinterestratehasmadethisschemefinanciallyviableandself-funding.Thishasultimately saved our tenants £510,000 plus interest, which we will invest elsewhere.

We secured £429,000 of Social Housing Grantin2015/16tohelpfinancethedevelopment of 6 new 2-bedroomed houses in Honeysuckle Close, replacing 14flatswhichwerepreviouslyletonapeppercorn rent of £1 per week.

Thelast2flatsinTheGreenwerereturnedto us during the year and they are currently under-going refurbishment for rental in 2016/17, these have been used as storage by a charity for many years, at a peppercorn rent. The number of policy voids at 31st March 2016 was 8.

RULE 8 – To create spare capacity to offer services to other organisations but never to the detriment of our tenants

We have provided tenancy management, financialandadministrativesupporttotheTaf Fechan Co-operative who commenced trading in March 2016. These services will be purchased by the Co-operative.

We have a future aspiration, primarily for the Property Services Team to provide a repairs service to third party organisations without havinganegativeeffectonourservicetotenants. No progress has been made on this to date.

Risk Management MVH faces a wide range of business risks. We manage and mitigate these risks using

our Risk Management Policy and Strategy. The Board has overall responsibility for risk management and receives a bi-annual report on risk. The Board has delegated the task of monitoring risk management to the Audit Committee.

The Risk Management Policy and Strategy is the framework for managing strategic riskswhichcouldaffectthedeliveryofour Corporate objectives. The Welsh Government’s Sector-Wide Risks have been considered and included, where appropriate. RiskisreviewedeveryquarterbytheSeniorand Executive Management Teams. The Audit Committee monitors how well risk is managed at each of their meetings, they also determine the risk appetite for each strategic risk. Where a strategic risk is reviewed and is found not to be within our risk appetite, action will be taken to either put further controls and mitigations in place, or to seek further assurance that the identifiedcontrolsareoperatingeffectively.Our internal auditors have stated that there is ‘substantial assurance’ over our approach to risk management.

The top 4 risks on our Strategic Risk Register at year end were:-1. The impact of the changes to the Welfare Benefitsystemandtheassociateddetrimentaleffectonincomeandourfinancialposition.

2. The impact of changes to the Welfare Benefitsystemandtheassociateddetrimentaleffectonourtenantsandcommunities.

3.Inadequateinsuranceprocessestosuccessfully defend liability claims.

4. The risk that any increase in costs which are linked to the Retail Price Index (RPI) will outstrip increases in income which are linked to the Consumer Price Index (CPI), which could have a detrimental long term effectontheBusinessPlan.


www.mvhomes.org.uk

19

Treasury ManagementMVH operates a Treasury Management Policy which underpins the annual Treasury Management Strategy and is based around four key principles:-•Compliancewithstatute,regulation&best

practice.•Securityoffinancialassets•Liquidity–ensuringthatresourcesareadequatetomeetobligations.

•Effectiveness&Efficiencyintheuseoffinancialresourcesandachievingvalueformoney.

The Treasury Management Strategy is reviewed and updated annually by our external advisors – Capita Asset Services. This is approved annually by the Board. The Board receives a bi-annual report on treasury management performance.

Financial risk management MVH’s activities expose it to a number of financialrisksi.e.liquidity,cashflowandcredit risk:

Liquidity riskMVH uses a combination of long term andshorttermdebtfinancetomaintainliquidity,ensuringthatsufficientfundsareavailable for ongoing operations and future developments. MVH holds cash, short term investments and has access to grants and a £40m loan facility.

MVH has two main sources of capital funding:-1. £40m loan facility from the Royal Bank of

Scotland (RBS) and Principality Building Society. This comprises £32m from RBS and £8m from Principality BS and is divided into two Tranches, A and B. Tranche A provides £24m and is fully drawn and Tranche B £16m. Tranche B is a revolving facility provided solely by RBS, meaning

that it can be drawn and repaid. Tranche Bwillconverttoa“term”loanfrom31March 2023. All borrowings to date have been drawn from Tranche A and therefore cannot be repaid until after we have reached peak debt in 2017/18. At 31 March 2016, our borrowing remained at £24m allowing us access to Tranche B monies although we did not need to draw down during 2015/16. This was mainly due to additional income received from Right to Buy sales during the year. The repayment of the loan facility is due by 31st March 2034 however our latest forecast indicates that we will repay by 31st March 2033.

2. £2.9m Dowry Gap Funding from the WG which is received on an annual basis and is guaranteed until March 2017. There is an expectation that it will continue to be received until 2036/37.

Peak debt of £33.039m is expected to occur in 2018/19 (in our 2016/17 business plan) which means that we have spare capacity of approximately £6m on our loan facility. This will be a useful way to fund our future new build plans, with Funders’ approval.

We also have a 25 year loan of £510,000 fromMerthyrTydfilCountyBoroughCouncilon a PWLB interest rate of 2.92%, with no set up fee, which has been used during the year to fund the refurbishment of Taf Fechan House. This loan will be repaid via a long term lease agreement with Taf Fechan Co-operative.

Cash flow riskOur activities expose us primarily to the financialriskofchangesininterestrates.Threeforwardfixedrateagreementswereput in place on transfer to hedge against adverse movements in interest rates. The second forward rate agreement of £10m was


www.mvhomes.org.uk

20

executed on 1 April 2015, meaning that we nowhave£20mofourloanfacilityonfixedrates. The loans drawn at 31 March 2016 of £24mconsistof£20matfixedinterestratesand £4m at variable rates.

Our Treasury Management Policy and Strategy sets out parameters for the ratio of fixedtovariablerateborrowingofbetween60-80%atfixedratesinordertogiveuscertainty over our costs. At 31 March 2016 theratiooffixedtovariablerateborrowingwas 84% of total loans outstanding. The proportionoffixedratedebtisprojectedtobe between 60% and 80% until 2025.

Credit riskMVH’sprincipalfinancialassetsarebankbalances and cash, rent arrears and other receivables and investments.

Our credit risk is primarily attributable to rent arrears. The amounts presented in the Statement of Financial Position are net of allowances for bad debts. The credit risk on our investments is limited because the counterparties are banks with credit ratings that fall in line with our Treasury Management Policy.

Key Accounting PoliciesThe key accounting policies are set out in Note 2 of the Financial Statements on pages 31-38. These have been revised in line with FRS102.

Going ConcernThe Board has a reasonable expectation that MVHhasadequateresourcestocontinuein operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financialstatements.

Reserves StrategyMVH has a Use of Capital Receipts Policy which sets out how and when capital receipts can be used. The priority for the use of capital receipts is to:•Managecashflow•Increasecapitalspendingonstock

reinvestment•Purchasepropertiesthroughatargetedbuy

back scheme•Financedevelopmentschemes,with

Funders approval.

Any cash reserves at year end will be retained and carried forward into the following year. It is not until we reach peak debt that we are able to repay our loans.

Nicola Evans – ChairDate: 29 September 2016


www.mvhomes.org.uk

21

The Board are pleased to present their report and audited financial statements for Merthyr Valleys Homes Limited (MVH) for the year ended 31 March 2016.

Principal ActivitiesMVHisanot-for-profitorganisationadministered by a voluntary Board. MVH operatesintheMerthyrTydfilCountyBorough Council local authority area. MVH’s principal activities are the management and improvement of social housing.

Performance for the YearThe Board reports a surplus of £2.662m. During the year MVH spent £16.130m on reactive, void and cyclical repairs and the capitalprogramme.Thiswasfinancedfrominternalfinancingi.e.rentalincome;incomefrom the sale of assets; Dowry Gap Funding and other grants.

Net Assets at 31 March 2016 were £11.520m. As at 31 March 2016 the restricted reserves for the Pension Fund Asset and the Big Lottery Fund were £4.860m and £2,000 respectively

Events after the reporting dateThere were no events after the reporting date.

GovernanceThe Board is responsible for managing the affairsofMVH.BoardMembersandSeniorOfficersarelistedonpage3underBoardMembers,ExecutiveOfficersandprofessionaladvisors.TheBoardMembershaveheldofficeduring 2015/16 unless otherwise stated. During 2015/16, the Board comprised 12 members, 4 of which were tenant board members, 4 independent members and 4 Councillors. There was also 1 co-opted member.

Board Report Year ended 31 March 2016

On 1 May 2016, our legal structure changed andMVHbecameWales’firsttenantandemployee mutual housing association, allowing tenants and employees to become members. The Mutual has two tiers of governance:•ADemocraticBodymadeupof21member

representatives: a) Tenant representatives elected by tenant

members; b)Staffrepresentativeselectedbystaff

members; c)RepresentationfromMerthyrTydfilCBC; d) Representation from local community

organisations•ABoardof8Directorswiththerelevant

skills and experience who have been appointed by the Democratic Body to run the Mutual on their behalf.

Each of the two parts of the governance structure has key areas of responsibility set out in the Rules and Governance Framework.

During 2015/16, MVH had two Committees, an Audit Committee and a Policy Committee, with membership drawn from the Board. Following the change in structure MVH will onlyhaveanAudit&RiskCommittee.

The Senior Executives have no legal status as directors, although they act as executives within authority delegated by the Board.

MVH has insurance policies indemnifying its Board Members and Senior Executives against liability when acting on behalf of the organisation.

www.mvhomes.org.uk

22


EmployeesThe number of employees at 31 March 2016 was 193. MVH’s ability to meet its objectives andcommitmentstotenantsinanefficientandeffectivemannerdependsonthecontribution of employees throughout the Association. MVH recognises and values diversity and is committed to strengthening community cohesion. MVH seeks to provide equalopportunitiesinemploymentandourEqualOpportunitiesPolicyisintendedto assist the organisation to put this into practice.

Charitable DonationsMVH made £40,000 in charitable donations in the year which were approved by the Grants and Sponsorship Panel. This included the following donations:-

Trelewis Community Garden 2,784

Viva! (Wales) 364

S.East Wales Rivers Trust 332

Twyn Action Youth Club 1,500

Community Links @ Coedydd 811

Voluntary Action MT 500

Wado-Kai Karate Union 400

Stephens&GeorgeCentenary 1,800

PenydarrenBoys&GirlsClub 1,000

CefnCoed50+Dance&Leisure 500

Aber Arts Wales 1,125

Pentrebach And Abercanaid O.A.A 339

Hoover Amateur Radio 385

Ad-Lib Productions 877

Merthyr Aloud Choir 1,045

MerthyrTydfilA.F.L. 275

Ponsticill Community Group 3,000

FriendsOfTaffBargoed 486

Wasps After School Club 422

Wado Kai Karate Union 455

Zoom Cymru 1,700

The Gate Trust Ltd 2,900

Willows Centre 3,000

Hope Church Merthyr 2,829

Gellideg Football Club 570

Friends Of The Peoples Kitchen 500

Cefn Coed Community Centre 3,000

Peoples Kitchen 1,162

Global Village 2,000

Forsythia Youth 1,938

Glamorgan Gwent Archaelogical Trust

2,000

www.mvhomes.org.uk

23


Statement of Internal ControlIn accordance with the Welsh Government Circular RSL 02/10 Internal Controls and Reporting, the Association’s Board acknowledges its responsibilities for the systems of internal control and reviewing their effectiveness.TheBoardalsoacknowledgesitsresponsibility for the wider aspects of risk. The AuditCommitteereviewstheeffectivenessof MVH’s internal controls on an ongoing basis and ensures that all necessary actions aretakentoremedyanysignificantfailingsorweaknesseswhichmaybeidentified.

The Association’s systems are designed to provide reasonable but not absolute assurance regarding:-•Thesafeguardingofassets.•Themaintenanceofproperaccounting

records.•Thereliabilityoffinancialinformation.•ThemanagementofriskswhichcouldadverselyaffecttheAssociation’sabilitytoachieve its business plan objectives.

The following mechanisms constitute the key elements of the framework designed and implemented by management to provideeffectiveinternalcontrol:-•StandingOrdersandFinancialRegulations

which sets out the Scheme of Delegation.•ContractStandingOrderssettingoutthe

framework for the procurement of goods and services.

•Clearlydefinedcorporateanddivisionalmanagement responsibilities and reporting structures.

•Suitablyexperiencedandqualifiedstaffmembers.

•FormalpoliciesandproceduresadoptedbytheBoardandunderstoodbystaff.

•Comprehensivesystemsoffinancialreporting including annual budgets and

quarterlymanagementaccountsreportedto the Board, detailing actual performance against budget.

•Regularmonitoringofloancovenants.•ARiskManagementFrameworkthatis

regularly reviewed and evaluated by the Board and Audit Committee.

•Wehavearangeofanti-fraudpolicies,including anti-bribery and anti money-launderingwhichareunderstoodbystaff.AFraud Register is maintained and reviewed by the Audit Committee at each meeting.

•Boardauthorisationofmajorcontractswhich could pose a risk to the organisation.

•Arobustinternalauditservicewhichreports to Audit Committee regularly.

•Athirtyyearfinancialbusinessplanthatis updated annually and is also used for mediumtermfinancialplanning.

•AProcurementStrategysettingouthowMVH will conduct procurement activities.

•AnnualDeclarationsofInterestreturnsfromallBoardmembersandstaff.

•AGiftsandHospitalityRegisteriskeptandis reviewed by the Audit Committee at each meeting.

•ASchedule1Registerismaintainedandall entries are reported to the Board by the Company Secretary.

The Audit Committee has reviewed the effectivenessofMVH’sinternalcontrolsduring the year. No weaknesses were found that resulted in material losses, contingenciesoruncertaintieswhichrequiredisclosureinthefinancialstatementsorinthe Auditor’s Report and the Board are not aware of any such weaknesses from 1 April 2016 to date.

www.mvhomes.org.uk

24


Statement of Board Members’ responsibilitiesThe Board are responsible for preparing the AnnualReportandfinancialstatementsinaccordance with applicable law and regulations.

TheCo-operativeandCommunityBenefitSocieties Act 2014 and Housing Association legislationrequirestheBoardtopreparefinancialstatementsforeachfinancialyear. Under that legislation the Board have electedtopreparethefinancialstatementsinaccordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) – FRS102, the Financial Reporting Standard applicable in the United Kingdom and Ireland. Under Housing Association legislation the Board must not approve the financialstatementsunlesstheyaresatisfiedthat they give a true and fair view of the state ofaffairsofMVHandofthesurplusordeficitof MVH for that period. In preparing these financialstatementstheBoardarerequiredto:•Selectsuitableaccountingpolicies,and

apply them consistently.•Makejudgmentsandaccountingestimates

that are reasonable and prudent.•StatewhetherapplicableUKAccounting

Standards have been followed, subject to any material departures disclosed and explainedinthefinancialstatements.

•Preparethefinancialstatementsonthe going concern basis unless it is inappropriate to presume that MVH will continue in business.

The Board are responsible for keeping adequateaccountingrecordsthataresufficientto show and explain MVH’s transactions and disclose with reasonable accuracy at any time thefinancialpositionofMVHandenablethemtoensurethatthefinancialstatementscomplywith Housing Association legislation. They are

also responsible for safeguarding the assets of MVH and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate andfinancialinformationincludedonMVH’swebsite. Legislation in the United Kingdom governing the preparation and dissemination offinancialstatementsmaydifferfromlegislation in other jurisdictions.

Disclosure of information to the auditorEach of the Board members at the date of approvalofthisreporthasconfirmedthat:•AsfarastheBoardmembersareaware,

there is no relevant audit information of which the Association’s auditor is unaware.

•TheBoardmembershavetakenallthesteps that they ought to have taken as Board members in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Annual Members MeetingThe Annual Members Meeting will be held on the 29 September 2016 at Pen y Dre High School. At this meeting, MVH’s 2015/16 Financial Statements will be presented for adoption.

AuditorA resolution for the reappointment of Mazars LLP will be proposed at the Annual Members Meeting.

By order of the Board of ManagementNicola Evans – ChairDate: 29 September 2016

www.mvhomes.org.uk

25

Respective responsibilities of the Board and auditorAs explained more fully in the Statement of the Board’s Responsibilities set out on page 24, the Board is responsible for the preparationofthefinancialstatementsandforbeingsatisfiedthattheygiveatrueandfair view.

Our responsibility is to audit and express anopiniononthefinancialstatementsin accordance with applicable law and International Standards on Auditing (UK andIreland).Thosestandardsrequireusto comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report is made solely to Merthyr Valleys Homes Limited’s members, as a body, in accordance with Part 7 of the Co-operative andCommunityBenefitSocietiesAct2014and Chapter 4 of Part 2 of the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to Merthyr Valleys Homes Limited’s members

Independent auditor’s report to the members of Merthyr Valleys Homes Limited


WehaveauditedthefinancialstatementsofMerthyr Valleys Homes Limited for the year ended 31st March 2016 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Reserves, the Statement of Cash Flows and the related notes.Thefinancialreportingframeworkthat has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 “TheFinancialReportingStandardapplicablein the UK and Republic of Ireland” (FRS102).

thosematterswearerequiredtostatetothem in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Merthyr Valleys Homes Limited and its members as a body for our audit work, for this report, or for the opinions we have formed.

We have reviewed the Board’s statement on Merthyr Valleys Homes Limited’s compliance with the Welsh Government circular RSL 02/10 ‘Internal controls and reporting’. We arenotrequiredtoexpressanopinionontheeffectivenessofMerthyrValleysHomesLimited’s system of internal control.

Scope of the audit of the financial statementsA description of the scope of an audit of financialstatementsisprovidedontheFinancial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on the financial statementsInouropinionthefinancialstatements:•giveatrueandfairviewofthestateofMerthyrValleysHomesLimited’saffairsasat 31st March 2016 and of its surplus for the year then ended;

•havebeenproperlypreparedinaccordance with United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 102“TheFinancialReportingStandardapplicable in the UK and Republic of Ireland”; and

www.mvhomes.org.uk

26

Independent auditor’s report to the members of Merthyr Valleys Homes Limited


•havebeenpreparedinaccordancewiththerequirementsoftheCo-operativeandCommunityBenefitSocietiesAct2014, the Housing and Regeneration Act 2008andtheAccountingRequirementsfor Registered Social Landlords General Determination (Wales) 2015.

Opinion on the other matter prescribed by the Welsh Government circular RSL 02/10 ‘Internal controls and reporting’With respect to the Board’s statement on internal control, in our opinion, the Board hasprovidedthedisclosuresrequiredbythe Welsh Government circular RSL 02/10 ‘Internal controls and reporting’ and the statement is not inconsistent with the information of which we are aware from our auditworkonthefinancialstatements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Co-operative andCommunityBenefitSocietiesAct2014requiresustoreporttoyouif,inouropinion;•MerthyrValleysHomesLimitedhasnot

kept proper books of account; or•asatisfactorysystemofcontrolover

transactions has not been maintained; or•thefinancialstatementsarenotin

agreement with the books of account; or•wehavenotreceivedalltheinformationandexplanationswerequireforouraudit.

.

Mazars LLPChartered Accountants and Statutory Auditor 45 Church StreetBirminghamB3 2RT

Date:

www.mvhomes.org.uk

27

Continuing OperationsAll transactions during the period are derived from continuing activities.

Statement of Comprehensive Income At 31 March 2016

TurnoverOperating expenditure

Operating SurplusSurplusondisposalofproperty,plantandequipmentInterest receivableInterestandfinancingcostsChangeinfairvalueoffinancialinstruments

Surplus before tax

Taxation

Surplus for the year

Actuarial gain / (loss) in respect of pension schemes

Total comprehensive income for the year

Notes

44

567821

2(o)

31

2016£’000

17,681(15,405)

2,276886140

(1,854)1,214

2,662

-

2,662

1,879

4,541

2015£’000

16,927(14,299)

2,628409203

(1,301)(184)

1,755

-

1,755

(473)

1,282

www.mvhomes.org.uk

28

Statement of Financial Position At 31 March 2016

Fixed AssetsIntangible assetsProperty,PlantandEquipment – Housing properties –OtherpropertyplantandequipmentInvestment properties

Current AssetsInventoriesDebtors – Amounts falling due within one year – Amounts falling due after one yearCash

Creditors: amounts falling due within one yearDowry funding and other government grants: amountsfalling due within one yearNet current assests excluding pension assetPension assetNet current assets including pension assetTotal assets less current liabilitiesCreditors: amounts falling due after more than one yearDowry funding and other government grants: amountsfalling due after more than one yearProvisions for liabilitiesNet Assets

Capital and ReservesShare capitalRevenue reservesRestricted reserves

Notes

11

121415

16

171827

19

22

31

20

2229

23

24

2016£’000

502

52,346930897

54,675

12

1,06771,5922,214

74,885(3,236)

(1,443)70,2064,860

75,066129,741(24,664)

(21,745)(71,812)11,520

-6,6584,862

11,520

2015£’000

374

47,906806897

49,983

21

1,25678,7324,002

84,011(5,031)

(1,259)77,7213,537

81,258131,241(25,513)

(20,017)(78,732)

6,979

-3,4413,5386,979

The Financial Statements on pages 27 to 63 were approved and authorised for issue by Board of Mangement on 29 September 2016 and were signed on its behalf:

Chair of the Board Vice Chair Company Secretary(Nicola Evans) (John Chown) (Allison Soroko)

Company registration no: 30532R

www.mvhomes.org.uk

29

Statement of Changes in Reserves


At 1 April 2014Surplus for the yearActuarial loss in respect of pension schemesTransfer between reservesAt 31 March 2015

At 1 April 2015Surplus for the yearActuarial gain in respect of pension schemesTransfer between reservesAt 31 March 2016

Notes

24

24

Revenuereserves

£’0001,4841,755

-202

3,441

£’0003,4412,662

-555

6,658

Restrictedreserves

£’0004,213

-(473)(202)

3,538

£’0003,538

-1,879(555)

4,862

Total£’0005,6971,755(473)

-6,979

£’0006,9792,6621,879

-11,520

www.mvhomes.org.uk

30

Statement of Cash Flows


Net cash generated from operating activities

Cash flows from investing activitiesPurchaseofproperty,plantandequipmentPurchaseofotherfixedassetsProceedsfromsaleofproperty,plantandequipmentGrants receivedInterest receivedNet cash outflows from investing activities

Cash flows from financing activitiesInterest paidInterestelementoffinanceleaserentalpaymentsRepayment of borrowingsCapitalelementoffinanceleaserentalpaymentsRevenue loan arrangementNet cash flows from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Free cash flow for the year end 31 March

Net cash generated from operating activities

Interest paidInterest receivedAdjustments for reinvestment in existing properties:Component replacementsPurchaseofotherreplacementfixedassetsComponent replacement grant receivedFree cash consumed before loan repaymentsLoans repaid (excluding revolving credit and overdrafts)Free cash consumed after loan repayments

Note27

2016£’0004,766

(8,097)(519)886

2,92818

(4,784)

(1,638)(8)

(20)(138)

34(1,770)

(1,788)

4,002

2,214

2016£’0004,766

(1,604)18

(7,303)(519)

2,900(1,742)

(20)(1,762)

2015£’0005,331

(11,942)(258)409

3,9378

(7,846)

(1,269)(8)

7,010(116)

345,651

3,136

866

4,002

2015£’0005,331

(1,235)8

(9,248)(258)

2,880(2,522)

-(2,522)

www.mvhomes.org.uk

31

Notes to the Financial Statements Year ended 31 March 2016

1) a) General information ThefinancialstatementsofMerthyrValleys

Homes Limited (MVH) for the year ended 31st March 2016 comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Reserves, the Statement of Cash Flows and the related notes. The financialstatementsarepresentedinsterling (£).

b) Company information MVH is registered under the Co-operative

andCommunityBenefitSocietiesAct2014 and is a Registered Social Landlord, registered with the Welsh Government. MVH has adopted charitable rules. MVH is incorporated in the United Kingdom. Its registeredofficeisMartinEvansHouse,AvenuedeClichy,MerthyrTydfil,CF478LD.

MVH owns, manages and maintains 4,182 rented homes, including 206 units of sheltered accommodation, located within theCountyBoroughofMerthyrTydfil.MVH also own or manage 630 garages, 39 retailunits,12co-operativehousingflatsand provide management services to 288 leasehold properties.

2) Accounting Policies The principal accounting policies are

summarised below. They have all been applied consistently throughout the year and the preceding year.

a) Basis of accounting Thefinancialstatementshavebeen

prepared under the historical cost convention,modifiedtoincludecertainitems at fair value, in accordance with

Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council and comply with the Statement of Recommended Practice for Registered Social Housing Providers 2014 (SORP), the Housing and Regeneration Act 2008 andtheAccountingRequirementsforRegistered Social Landlords General Determination (Wales) 2015. Merthyr ValleysHomesLimitedisapublicbenefitentity,asdefinedinFRS102andappliestherelevantparagraphsprefixed‘PBE’inFRS 102.

b) Statement of compliance ThisisthefirstyearMVHhasprepared

itsfinancialstatementsinaccordancewithFRS102,accordinglythefinancialinformation as at 1 April 2014 (being the date of transition) and for the year ended 31 March 2015 have been restated for material adjustments on adoption of FRS 102 in the current year. For more information see note 32.

c) Intangible assets Intangible assets are stated at historic

cost, less accumulated amortisation. Amortisation is provided on all intangible assetsatratescalculatedtowriteoffthecost of each asset on a straight line basis over its expected useful life, as follows:

ComponentProjected Economic Life (years)

Computer software 5-8

www.mvhomes.org.uk

32


d) Property, plant and equipment - housing properties

Following the transfer from the Council on 30 March 2009 the properties were valued at £nil. Housing properties are stated at cost less accumulated depreciation and accumulated impairment losses. Costincludesthecostofacquiringland and buildings, directly attributable development costs and borrowing costs directly attributable to the construction of new housing properties during the development. Directly attributable costs can include the labour costs of Merthyr Valleys Homes in-house Property Services Team, materials and overhead costs.

Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete.

Depreciation is charged so as to write down the net book value of housing properties to their estimated residual value, on a straight line basis, over their useful economic lives. Freehold land is not depreciated. Properties in the course of construction are not depreciated.

Traditionally built properties are depreciated over 100 years. Non-traditionally built properties are depreciated over 50 years.

Major components Major components of housing properties,

whichhavesignificantlydifferentpatternsofconsumptionofeconomicbenefits,aretreated as separate assets and depreciated over their expected useful economic lives at the following annual rates:

Properties held on long leases are depreciated over their estimated useful economic lives or the duration of the lease, if shorter.

Improvements Where there are improvements to housing

properties that are expected to provide incrementalfuturebenefits,thesearecapitalised and added to the carrying amount of the property. Any works to housing properties which do not replace a component or result in an incremental futurebenefitarechargedasexpenditureinsurplusordeficitintheStatementofComprehensive Income. To increase an asset’s performance, expenditure must result in one or more of the following:-

•Increasedrentalincome. •Areductioninfuturemaintenancecosts. •Asignificantextensiontotheusefullife

of the property.


Roofs 50

Windows and Doors 30

Kitchens 15

Bathrooms 25

Heating Systems Upgrades 15

Rewires 25

Building Structure (walls, retaining walls, paths etc)

50

Other 10-15

www.mvhomes.org.uk

33


Leaseholders Where the rights and obligations for

improving a housing property reside with the leaseholder or tenant, any works to improve such properties incurred by MVH is recharged to the leaseholder and recognisedinsurplusordeficitintheStatement of Comprehensive Income along with the corresponding income from the leaseholder or tenant.

Timing of depreciation on housing properties A full year’s depreciation will be charged to

the Statement of Comprehensive Income in respectofanassetintheyearofacquisitionand none in the year of disposal.

e) Non-housing property, plant and equipment

Non-housingproperty,plantandequipmentis stated at historic cost less accumulated depreciation and any provision for impairment. Depreciation is provided on all non-housingproperty,plantandequipment,other than investment properties and freeholdland,atratescalculatedtowriteoffthe cost or valuation, less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows:

The re-life of an asset will only occur in exceptional circumstances where the asset’s useful economic life is known in advance to be reduced.

Timing of depreciation on non-housing property,plantandequipment The commencement of depreciation

charged to the Statement of Comprehensive Income in respect of an asset is in the month following the acquisitionofthatasset.

f) Investment properties Theclassificationofpropertiesas

investment property or property plant and equipmentisbasedupontheintendeduse of the property. Properties held to earn commercial rentals or for capital appreciation,orboth,areclassifiedasinvestment properties. Properties that are used for administrative purposes or that are held for the provision of social housing are treated as property plant andequipment.Mixedusepropertyisseparated between investment property andproperty,plantandequipment.

Land is accounted for based on its intended use.Wherelandisacquiredspeculativelywith the intention of generating a capital gain and/or a commercial rental return it is accounted for as investment property. Wherelandisacquiredforuseintheprovision of social housing or for a social benefititisaccountedforasproperty,plantandequipment.

Investment properties are measured at fair value annually with any change recognisedasasurplusordeficitintheStatement of Comprehensive Income.

.


OfficeImprovements 10

Furniture,fixturesandfittings 10

Telephone System 8

OfficeEquipment 5Computer Implemention Hardware 5

Computer Hardware - Other 3SchemeEquipmentandFurniture 10-25

www.mvhomes.org.uk

34


g) Impairment of social housing propertiesPropertiesheldfortheirsocialbenefitarenotheldsolelyforthecashinflowstheygenerate and are held for their service potential.

An assessment is made at each reporting date as to whether an indicator of impairment exists. If such an indicator exists, an impairment assessment is carried out and an estimate of the recoverable amount of the asset is made. Where the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised as a surplusordeficitintheStatementofComprehensive Income. The recoverable amount of an asset is the higher of its value in use or fair value less costs to sell. Where assets are held for their service potential, value in use is determined by the present value of the asset’s remaining service potential plus the net amount expected to be received from its disposal. Depreciated replacement cost is taken as a suitable measurement model.

Merthyr Valleys Homes check annually for any indication of impairment by reference to:-•Trendsinvoidsratesandlettingof

housing stock.•Advicefromexternalvaluersregarding

their expectations of the value of stock.

An impairment loss is reversed if the reasons for the impairment loss have ceasedtoapply.Thissurplusordeficitwill be shown in the Statement of Comprehensive Income.

h) Social Housing Grant and other Government grants

Where grants are received from government agencies such as the Welsh Government, local authorities, devolved government agencies, health authorities and the European Commission and meet thedefinitionofgovernmentgrants,theyare recognised when there is reasonable assurance that the conditions attached to them will be complied with and that the grant will be received. Dowry gap funding is received from the Welsh Government and it is not repayable.

Government grants are recognised using theaccrualmodelandareclassifiedeither as a grant relating to revenue or a grant relating to assets. Grants relating to revenue are recognised in income on a systematic basis over the period in which related costs for which the grant is intended to compensate are recognised. Where a grant is receivable as compensation for expenses or losses already incurred or for the purpose of givingimmediatefinancialsupportwithno future related costs, it is recognised as revenue in the period in which it becomes receivable.

Grants relating to assets are recognised in income on a systematic basis over the expected useful life of the asset. Grants received for housing properties are recognised in income over the expected useful life of the housing property structure. Where a grant is received specificallyforcomponentsofahousingproperty, the grant is recognised in income over the expected useful life of the component.

www.mvhomes.org.uk

35


Grants received from non-government sources are recognised as revenue using the performance model.

. i) Donation or acquisition of land or other

asset at below market value Where a donation of land and/or other

assetsisreceivedorMVHacquireslandand/or other assets at below their market value from a third party that does not meetthedefinitionofagovernmentsource; the transaction is recognised as an asset in the Statement of Financial Position at fair value, taking account of any restrictions on the use of the asset. Incomeequivalenttothedifferencebetween any amounts paid or payable for the asset and the fair value of the asset is recognisedasasurplusordeficitintheStatement of Comprehensive Income as a donation when future performance-related conditions are met.

j) Agreements to improve existing properties

MVH has a 15 year VAT Shelter in place, approved by HMRC. The VAT Shelter transfers the VAT cost of the works requiredtomeettheWelshHousingQualityStandardtoMerthyrTydfilCountyBorough Council. The transactions are as follows:

•UnderthetransferagreementtheCouncil transferred the properties to MVH together with an obligation to undertake the WHQS works at the Council’s expense. The price paid for the properties was £133,023,642; this pricereflectstheTenantedMarketValue of the stock which is nil and

the estimated value of the works of £133,023,642.

•TheCouncildischargeditsobligationtocarry out the works under the Transfer Agreement by entering into a 15 year Development Agreement with Merthyr ValleysHomes.Thisisafixedpricecontract for £133,023,642 plus VAT of £19,953,546.

Over the life of the Development Agreement, MVH is entitled to reclaim VAT on the costs it incurs from third parties for carrying out the WHQS works, as detailed in the Development Agreement.

Thecommercialeffectofthesetransactions is that MVH has both an asset (the Council’s obligation to have the refurbishment work carried out) and a legally binding obligation to a third party (under the Development Agreement) and these assets and liabilities are recognised inthefinancialstatements.

k) Inventories Inventories are stated at the lower of cost

and net realisable value.

l) Restricted reserves Where reserves are subject to an external

restriction they are separately recognised within reserves as a restricted reserve. Revenue and expenditure is included insurplusordeficitintheStatementofComprehensive Income and a transfer is made from the general reserve to the restricted reserve. A description of each restricted reserve is included in Note 24.

www.mvhomes.org.uk

36


m) Leased assets At inception MVH assesses agreements

that transfer the right to use assets. The assessment considers whether the arrangement is, or contains, a lease based on the substance of the arrangement.

Finance leased assets Leases of assets that transfer substantially

all the risks and rewards incidental to ownershipareclassifiedasfinanceleases.

Finance leases are capitalised at commencement of the lease as assets at the fair value of the leased asset or, if lower, the present value of the minimum lease payments calculated using the interest rate implicit in the lease.

Assets are depreciated over the shorter of the lease term and the estimated useful life of the asset. Assets are assessed for impairment at each reporting date.

The capital element of lease obligations is recorded as a liability on inception of the arrangement. Lease payments are apportioned between capital repayment andfinancechargetoproduceaconstantrate of charge on the balance of the capital repayments outstanding.

Operating leased assets Leases that do not transfer all the risks

andrewardsofownershipareclassifiedasoperating leases.

Payments under operating leases are chargedtosurplusordeficitintheStatement of Comprehensive Income on a straight-line basis over the period of the lease.

n) Interest payable Borrowing costs are interest and other

costs incurred in connection with the borrowing of funds. For new loans, these costs are allocated to the Statement of Comprehensive Income over the term of the loan. Where loans are redeemed, the full cost of any redemption penalty is recognised in the Statement of Comprehensive Income in the year redemption takes place.

o) Taxation (a) VAT Merthyr Valleys Homes is registered for

VAT.ThefinancialstatementsincludeVATtotheextentthatitissufferedbyMerthyrValleys Homes and not recoverable from HM Revenue and Customs (HMRC). The balance of the VAT payable or recoverable at the year end is included as a current liability or asset.

(b) Corporation Tax MVH is treated as charitable for taxation

purposes.ThiswasconfirmedbyHMRevenue and Customs (HMRC) on 3 September 2008.

Consequently,thesurplusesderivedfromprimary charitable activities are exempt from taxation.

p) Pensions Local Government Pension Scheme MVH participates in the Rhondda Cynon

Taf (RCT) Local Government Pension Scheme. The Fund is administered by Rhondda Cynon Taf County Borough Council.Manyofthestaffwhotransferredto Merthyr Valleys Homes at the time of transfer were members of the fund and

www.mvhomes.org.uk

37


any pension liabilities on transfer were fully fundedbytheCouncil,withsubsequentcosts to be incurred by the Association. Merthyr Valleys Homes has purchased a Pension Bond from the Royal Bank of Scotland PLC who has agreed to provide this Bond to Rhondda Cynon Taf (RCT) Local Government Pension Scheme in the sum of £534,000 (the Bond amount).

All existing and new employees have the optionofjoiningtheFund.Itisadefinedbenefitscheme,providingbenefitsbasedonfinalpensionablepay.

The Local Government Pension Scheme is a multi-employer scheme where it is possible for individual employers, as admitted bodies, to identify their share of the assets and liabilities of the pension scheme. For this scheme the amounts charged to operating surplus are the costs arising from employee services rendered during the period and the cost ofplanintroductions,benefitchanges,settlements and curtailments. They areincludedaspartofstaffcosts.Thenetinterestcostonthenetdefinedbenefitliabilityischargedtorevenueandincludedwithinfinancecosts.Re-measurement comprising actuarial gains and losses and the return on scheme assets (excluding amounts included in net interestonthenetdefinedbenefitliability)are recognised immediately in other comprehensive income.

Definedbenefitschemesarefunded,with the assets of the scheme held separately from those of MVH, in separate trustee administered funds. Pension scheme assets are measured at fair

value and liabilities are measured on an actuarial basis using the projected unit credit method. The actuarial valuations are obtained at least triennially and are updated at each Statement of Financial Position date.

q) Turnover Turnover represents rent and service

charges receivable (net of rent and service charge losses from voids) and disposal proceeds of current assets together with revenue grants from local authorities and the Welsh Government and charitable fees and donations.

r) Leaseholder sinking fund Where leaseholders pay in advance

foridentifiedfutureplannedormajorworks, any unutilised contributions are recognised as a liability in the Statement of Financial Position.

s) Financial instruments Financialassetsandfinancialliabilities

are recognised when MVH becomes a party to the contractual provisions of the instrument.

Financial Assets Financial assets comprise rent arrears,

trade and other receivables and cash andcashequivalents.Financialassetsare initially recognised at fair value plus directly attributable transaction costs.

Provision is made against rent arrears

of current and former tenants as well as other debts, to the extent that they are considered potentially irrecoverable.

www.mvhomes.org.uk

38


Afinancialassetisderecognisedwhenthecontractualrightstothecashflowsexpire,orwhenthefinancialassetandall substantial risks and reward are transferred.

If an arrangement constitutes a financingtransaction,thefinancialasset is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Financial Liabilities Thesefinancialliabilitiesincludetradeand

other payables and interest bearing loans and borrowings.

Non-current debt instruments which

meet the necessary conditions in FRS 102 are initially recognised at fair value adjusted for any directly attributable transaction cost, with interest-related charges recognised as an expense infinancecostsintheStatementofComprehensive Income. Where a non-current debt instrument has a non basic element, this is measured at fair value annually with any change recognised in the Statement of Comprehensive Income.

Afinancialliabilityisderecognisedonlywhen the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.

t) Cash and cash equivalents Cashandcashequivalentscomprisecash

in hand and demand deposits, together withothershortterm,highlyliquidinvestments that are readily convertible into known amounts of cash and are

subjecttoaninsignificantriskofchangesin value.

3) Significant management judgements and key sources of estimation uncertainty

Thepreparationofthefinancialstatementsrequiresmanagementtomakejudgements, estimates and assumptions thataffecttheapplicationofpoliciesandreported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual resultsmaydifferfromtheseestimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised andinanyfutureperiodsaffected.

Significant management judgements The following are management

judgements in applying the accounting policies of MVH that have the most significanteffectontheamountsrecognisedinthefinancialstatements.

Impairment of social housing properties MVH have to make an assessment as to

whether an indicator of impairment exists, In making the judgement, management considered the detailed criteria set out in the SORP.

www.mvhomes.org.uk

39


Estimation uncertainty MVH make estimates and assumptions

concerning the future. The resulting accountingestimateswill,bydefinition,seldomequaltherelatedactualresults,The estimates and assumptions that have asignificantriskofcausingamaterialadjustment to the carrying amounts of assets and liabilities within the next financialyearareaddressedbelow.

Fair value measurement Managementusesvaluationtechniques

to determine the fair value of assets. DetailsofMVH’sfinancialinstrumentsmeasured at fair value are set out in note 21. Treasury management specialists are engaged to provide MVH with the valuation. Investment properties are measured at fair value, using market valuespreparedbyafirmofpropertyvaluation experts.

Provisions Using information available at the year

end date, management estimate the levelofprovisionrequiredtoaccountforpotentially uncollectible debts.

Definedbenefitpensionscheme MVH has obligations to pay pension

benefitstocertainemployees.Thecostofthesebenefitsandthepresentvalueof the obligation depend on a number of factors, including life expectancy, salary increases, asset valuations and the discount rate of corporate bonds. Management estimates these factors in determining the net pension asset in the Statement of Financial Position. The assumptionsreflecthistoricalexperience

andcurrenttrends.Afirmofactuariesare engaged to provide MVH with expert advice about the assumptions to be applied.

.

www.mvhomes.org.uk

40


Note A

Social Housing lettings(Note B)

Other social housing activitiesSupporting PeopleOther grant incomeOther incomeTotal

Turnover

£’00017,363

7578

16517,681

OperatingCosts£’00015,325

80--

15,405

OperatingSurplus

£’0002,038

(5)78

1652,276

Turnover

£’00016,476

9438

31916,927

OperatingCosts£’000

14,222

77--

14,299

OperatingSurplus

£’0002,254

1738

3192,628

2016 2016 2016 2015 2015 2015

4) Turnover, Operating Costs and Operating Surplus

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

Note B

IncomeRents receivableService charges incomeAmortised government grantsTurnover from social housing lettings

ExpenditureService charge costsManagementTenant supportRoutine maintenanceMajor repairs expenditureBad debts from rentBad debts from other incomeDepreciation of housing propertiesOperational costs

Operating surplussocial housing lettingsVoid losses

General Needs£’000

14,93591

1,41816,444

12,945

3275,6742,536

8255

3,19114,811

1,633

320

Particulars of income and expenditure from social housing lettings

ShelteredHousing

£’000764155

-919

62452

------

514

405

10

2016£’000

15,699246

1,41817,363

633,397

3275,6742,536

8255

3,19115,325

2,038

330

2015£’000

14,967263

1,24616,476

652,914

3245,5392,480

8923

2,78814,222

2,254

401

www.mvhomes.org.uk

41


2016£’000

1133,219

-30122

5329

330137

2015£’000

1042,791

12241

1917111

401112

2015£’000

584(115)469(60)409

2016£’000

18122140

2015£’000

8195203

5) Operating Surplus Operating surplus for the year is after charging:

Amortisation – intangible assetsDepreciation – housing propertiesImpairment – housing propertiesDepreciation –otherfixedassetsAuditor’s remuneration in respect of audit servicesOperating lease rentals (premises)Operating lease rentals (other)Rent losses from voidsBad debt costs

6) Surplus on Disposals of Property, Plant and Equipment

7) Interest Receivable

Bank interest receivablePensionfinanceincomeTotal

Sales proceedsLess costs of saleSurplus on sale of housing propertiesLossonthedisposalofotherfixedassetsSurplus on disposal

Sales proceeds relates to the sale of 24 Right to Buy properties (2015: 14 properties).

Within grant and other income in Note A is income received from the following:

Grants from SPRGOther grant incomeShop rentsLeaseholdersOther income

2016£’000

757899

-66

2015£’000

94388850

181

2016£’0001,176(237)939(53)886

www.mvhomes.org.uk

42


9) Directors’ Emoluments

The highest paid director (Chief Executive) is an ordinary member of the Merthyr ValleysHomesdefinedbenefitpensionschemewithnoenhancedorspecialtermsapplied to their membership. MVH makes no contribution to any individual pension arrangement in respect of the highest paid director other than LGPS contributions.

No remuneration was paid to the members of the Board during the year (2015: £Nil).

ThefulltimeequivalentnumberofkeypersonnelincludingtheChiefExecutivewhoseremuneration payable in the period fell within the following bands:

Thekeymanagementpersonnelaretheexecutiveofficerslistedonpage3.

Wages and salariesSocial security costsOther pension costsTotal

Emoluments of the highest paid Director, excluding pension contributions

2016£’000

3584121

420

118

2015£’000

3564025

421

117

2016£’0001,846

81,854

2015£’0001,293

81,301

8) Interest and Financing Costs

Bank loans and overdraftsFinance lease chargesTotal

2016No.

-3-1

2015No.

12-1

£80,001 - £90,000£90,001- £100,000£100,001 - £110,000£110,001 - £120,000

www.mvhomes.org.uk

43


11) Intangible Assets

Cost

At beginning of yearAdditions during the yearDisposals during the yearAt end of year

AmortisationAt beginning of yearCharge for the yearDisposals during the yearAt end of year

Net book valueAt end of year

At beginning of year

Computersoftware

£’000

845243

(5)1,083

471113(3)

581

502

374

10) Staff Costs

Staffcostsduringtheyear:Wages and salariesSocial security costsOther pension costsTotal staff costs

The average monthly number of staff – full time equivalent

This comprises:Central Support Services, encompassing:Finance, HR, Corporate Services and AdministrationAsset ManagementProperty Services TeamHousingTotal

Staffemployedatyearend–fulltimeequivalentThe calculations are based on a 37 hour working week

2016£’000

4,988551

1,0366,575

2016No:

358

9552

190

193

2015£’000

4,617498821

5,936

2015No:

308

9447

179

185

www.mvhomes.org.uk

44


Costs capitalised during the year related to components. Total expenditure on properties during the year was £16.130m. Of this £7.92m was capitalised and £8.21m was expensed through the Statement of Comprehensive Income.

12) Tangible Fixed Assets – Housing and Other Properties

CostAt beginning of yearTransferred on completionAdditions during the yearDisposals during the yearAt end of year

DepreciationAt beginning of yearCharge for the yearDisposals during the yearAt end of year

Net book valueAt end of year


Housing properties

held for letting£’000

54,3302,6457,303(309)

63,969

(8,474)(3,219)

48(11,645)

52,324

45,856

Housing properties in the course of construction

£’0002,050

(2,645)617

-22

----

22

2,050

2016Total

£’00056,380

-7,920(309)

63,991

(8,474)(3,219)

48(11,645)

52,346

47,906

www.mvhomes.org.uk

45


14) Tangible Fixed Assets - Other

Cost

At beginning of yearAdditions during the yearDisposals during the yearAt end of year

DepreciationAt beginning of yearCharge for the yearDisposals during the yearAt end of year

Net Book ValueAt end of year


OfficeFurniture

£’000

4931

(1)493

20271-

273

220

291

Office Equipment

£’000

81930

(259)590

512102

(259)355

235

307

SchemeEquipment

£’000

13013-

143

227-

29

114

108

Motor vehicles

£’000

458146

-604

358121

-479

125

100

13) Housing Stock

General NeedsShelteredGaragesRetail PremisesCo-operative HousingLeasehold HousesLeasehold FlatsLeasehold GaragesLeasehold Retail PremisesTotal

2016No

3,9762064163212

176112214

75,151

2015No

4,003206416

31-

185112217

85,178

£’000

-236

-236

----

236

-

2016Total

£’000

1,900426

(260)2,066

1,094301

(259)1,136

930

806

Officeequipmentincludesfinanceleaseswithacostof£83,000(2015:£67,000),accumulated depreciation of £72,000 (2015: £62,000) and a net book value of £11,000 (2015:£5,000).Motorvehiclesincludesfinanceleaseswithacostof£604,000(2015:£458,000), accumulated depreciation of £479,000 (2015: £358,000) and a net book value of £125,000 (2015: £100,000).

Office premises in the course of construction

www.mvhomes.org.uk

46


17) Debtors: Amounts Falling Due Within One Year

Rent arrearsLess: Provision for bad debts

Sales DebtorsLess: Provision for bad debts

VATOther Debtors Total

2016£’000

793(276)

517174

(144)3062

4581,067

2015£’000

829(300)

529213

(107)106209412

1,256

Analysis of stock held:

Materials and consumables

2016£’000

12

2015£’000

21

16) Inventories

15) Investment Properties

Had the investment properties been measured at historical cost, the carrying value would be £Nil (2015: £Nil).

Investment properties were valued to fair value based on a valuation undertaken by Savills,anindependentvaluerwhoholdsaprofessionalqualificationwiththeRoyalInstitute of Chartered Surveyors (RICS). The method of determining fair value was by reference to market value for comparable property. Other factors taken into account in the valuations include the tenure of the property, tenancy details, the condition of the building,theenvironmentalrisksassociatedwiththepropertyandthefloorareasoftheproperties.

2016£’000

897-

897

2015£’000

897-

897

At 1 AprilChanges on revaluation of investment propertiesAt 31 March

www.mvhomes.org.uk

47


19) Creditors: amounts falling due within one year

Bank loans and overdraftsObligationsunderfinanceleasesAccrualsDeferred incomeRents received in advanceSalary and other employee costsOther taxation and social securityCapital expenditure on housing propertiesGovernment grantsOther capital creditorsTotal

2016£’000

36544

87832

151398169

1,0966736

3,236

2015£’000

157103

1,91941

116407190

1,582468

485,031

18) Debtors: Amounts falling due after one year2016

£’00078,732(7,140)71,592

2015£’000

87,975(9,243)78,732

WHQS WorksAt beginning of yearReleased during the yearAt the end of the year

See note 29 provisions for liabilities for information.

20) Creditors: amounts falling due after more than one year

Bank loans - basicBank loans - non basicBank loan issuing costsOther loansObligationsunderfinanceleasesLeaseholder sinking fund

Environmental Warranty due to MTCBC

2016£’000

24,000-

(612)490

96376

24,350314

24,664

2015£’000

16,0009,214(646)

51013

10825,199

31425,513

www.mvhomes.org.uk

48


Bank loansOn demand or within one yearbetween one and two yearsbetweentwoandfiveyearsAfterfiveyears

2016£’000

365--

24,49024,855

2015£’000

157--

25,72425,881

Borrowings

Housing loans are secured (via Prudential Security Trustee) by a charge on the total propertystockownedbyMVH.Theinterestrateisfixedat4.345%orvarieswiththemarket rate. To fund the Welsh Housing Quality Standard works MVH has arranged a loan facility of £40m to be drawn down over several years. The issuing costs relate to the arrangement fee of the loan facility.

At 31 March 2016 MVH had undrawn loan facilities of £16 million.

MVHhave£20mofourloanfacilityonfixedrates,withaforwardfixedrateagreementfor£10mbeingexecutedon1April2015.Afurtherfixedrateagreementisinplacefor£10m on 1 April 2020.

TheRBSpart(£8M)ofthefirstfixedrateagreementgavethebanktheoptiontocancelthefixon31March2015,whichitchosenottodo.Consequentlythiselementoftheloan has been fair valued as a non basic loan in line with FRS102 up to 31 March 2015 and valued as a basic loan after that date.

During 2014/15 MVH received a loan of £510,000 on a PWLB interest rate of 2.92% from MTCBC to fund the refurbishment of Taf Fechan House as part of MTCBC’s Vibrant and Viable Places project.

FRS102hasresultedinthereclassificationofanumberofmotorvehicleandofficeequipmentleasesfromoperatingleasestofinanceleases(seeNote14andNote32for further details).

Finance LeasesOn demand or within one yearbetween one and two yearsbetweentwoandfiveyearsAfterfiveyears

2016£’000

443462

-140

2015£’000

10385-

116

Finance Leases

www.mvhomes.org.uk

49


Leaseholder sinking fundUnderSORP2014,whereleaseholderspayinadvanceforidentifiedfutureplannedor

major works, any unutilised contributions are recognised as a liability in the Statement of Financial Position. This liability will reduce annually in line with completed planned or major works on leasehold properties.

Environmental WarrantyAspartoftheTransferAgreementwithMTCBC,MVHisrequiredtopaytheCouncil

anamountequivalenttothecostswhichMTCBCincursinsecuringenvironmentalinsurance in relation to MVH’s properties until 2039. Under the terms of the Transfer, this would be limited to £500,000. This cost was included in full in the set up costs in the 2009 Financial Statements. MTCBC currently has insurance up to 29 March 2019. The balance still owed to MTCBC under this agreement is £313,901.

21) Financial Instruments ThecarryingvaluesofMVH’sfinancialassetsandliabilitiesaresummarisedbycategory

below:

Financial assetsMeasured at undiscounted amount receivable:Rent arrears (see note 17)Loans payable (see note 17)

Financial liabilitiesMeasured at fair value through Statement of Comprehensive Income:Loans payable (see note 20)

Measured at amortised cost:Loans payable (see note 20)Obligationsunderfinanceleases(seenotes19and20)

Measured at undiscounted amount payable:Bank loans and overdrafts (see note 19)Accruals (see note 19)Capital creditors (see note 19)Leaseholder sinking fund (see note 20)Environmental Warranty (see note 20)

2016£’000

793174967

-

24,490140

365878

1,132376314

27,695

2015£’000

829213

1,042

9,214

16,510116

1571,9191,630

108314

29,968

www.mvhomes.org.uk

50


22) Dowry funding and other govenment grants

Dowry funding and other grantsAt beginning of yearTransferred on CompletionAdditions during the yearDisposals during the yearRecycled grant during the yearAt end of year

Amortisation of GrantsAt beginning of yearCharge for the yearDisposals during the yearAt end of year

Net Book ValueAt end of year


Amounts falling due:Within one year or lessIn more than one yearTotal grant creditor

Housing properties

held for letting£’000

(24,938)(1,432)(2,900)

144(144)

(29,270)

4,6651,443

(26)6,082

(23,188)

(20,273)

1,44321,74523,188

Housing properties in the course of construction

£’000

(1,003)1,432(429)

---

----

-

(1,003)

---

MVH’Sincome,expense,gainsandlossesinrespectoffinancialinstrumentsaresummarised below:

Interest income and expenseTotalinterestincomeforfinancialinstrumentsatamortisedcostTotalinterestexpenseforfinancialinstrumentsatamortisedcost

Fair value gains and lossesOnfinancialliabilitiesmeasuredatfairvaluethroughStatement of Comprehensive Income

2016£’000

181,854

1,214

2015£’000

81,301

(184)

2016Total

£’000

(25,941)-

(3,329)144

(144)(29,270)

4,6651,443

(26)6,082

(23,188)

(21,276)

1,44321,74523,188

www.mvhomes.org.uk

51


23) Share Capital

Cumulative total capital grants received are £29.27m. This relates to £23.88m of dowry funding,£3.79mofenergyefficiencygrantsand£1.6mofsocialhousinggrant.

Dowry funding relates to the dowry grant received from the Welsh Government. In addition to the £2.9m received, £144k relating to the disposal of components was re-used during the year.

The shares provide members with the right to vote at General Meetings but the shares do not carry the right to dividend payments or distribution on winding up. Shares cancelled or redeemed are written back to reserves.

Shares at £1 eachShares at beginning of year Issued during the yearCancelled during the yearAt the end of the year

201639

-(3)36

2015373

(1)39

24) Restricted Reserves

Pension ReserveAt beginning of yearActuarial movementTransfer(to)theIncome&ExpenditureAccountAt the end of the year

Big Lottery FundAt beginning of yearUtilised during the yearTransferfromtheIncome&ExpenditureAccountAt the end of the year

2016£’0003,5371,879(556)

4,860

£’0001-12

2015£’0004,208(473)(198)

3,537

£’0005

(4)-1

This reserve matches the value of the Pension Fund Asset. It is therefore restricted and not available to be spent for any general purpose of MVH.

Funding is received from the Big Lottery Community Voice grant for Perthyn: Belonging project. This is a project between younger and older people living in three areas ofMerthyrTydfillookingatsocialhousingtenantsexperienceovertime.Itisrestrictedinline with the terms of the grant. Total grants received during the year was £24k.

www.mvhomes.org.uk

52


25) Operating Leases

Total future minimum lease payments under non-cancellable operating leases are as follows:

Operating Leases costs due:Within one yearBetweentwoandfiveyearsInmorethanfiveyears

2016£’000

171361

-532

2015£’000

171532

-703

2016£’000

72-9

2015£’000

119-

20

Land & Buildings Other

26) Financial Commitments

Financial commitments are as follows:

Contracted for but not provided for within one year betweenoneandfiveyears afterfiveyears

Approved by the directors but not contracted for

2016Total

£’000

952500

-

177

2015Total

£’000

2,0961,000

-

-

The Association expects that any expenditure that has been authorised will be fully funded by grants and loan draw downs.

www.mvhomes.org.uk

53

Other


27) Notes to the Statement of Cash flows

Net cash generated from operating activitiesOperating Surplus for the yearAdjustment for non cash items:Amortisation of intangible assetsDepreciationofproperty,plantandequipmentAmortisation of government grantsWorking capital movements:Decrease / (increase) in inventoriesDecrease / (increase) in debtors < 1 yearDecrease / (increase) in debtors > 1 yearDecrease / (increase) in creditors < 1 yearIncrease in creditors > 1 year(Decrease)/increase in provisionsPensions costs less contributions payableCarryingamountofproperty,plantandequipmentdisposalsImpairmentlossonproperty,plantandequipmentdisposalsAdjustingforinvestingandfinancingitems:Surplusondisposalofproperty,plantandequipmentInterest receivable InterestandfinancingcostsChangeinfairvalueoffinancialinstrumentsNet cash generated from operating activities

Cash and cash equivalentsCash at bank and in handCashequivalentsincludedincurrentassetinvestmentsCash and cash equivalents

2016£’0002,662

1133,520

(1,443)

9189

7,140(1,045)

268(6,920)

678(19)

-

(886)(140)1,854

(1,214)4,766

£’0002,214

-2,214

2015£’0001,755

1043,032

(1,259)

(12)152

9,243314

14(9,253)

393(2)

(23)

(409)(203)1,301

1845,331

£’0004,002

-4,002

www.mvhomes.org.uk

54


28) Related PartiesAs at 31 March 2016 MVH was managed by a Board of Management (the Board) of 12 people. Four are tenants, four are Council nominees and four are independent. As at 31 March 2016 12 Board members were in place plus one co-optee.

Tenancies provided to Board members are based on the MVH standard terms and Board members cannot use their position to their advantage. As at 31 March 2016 there were no cumulative rent arrears for the tenant board members and cumulative receipts totalled £10,808. MTCBC is a party to the Transfer Agreement that established MVH and holds the right to nominate four members to the Board who are Councillors of MTCBC. A total of four Councillors served as Board members during the year. Any transactions with the Council are at arm’s length, on normal commercial terms and Council Board members cannot use their position to their advantage. During the year MVH made payments totalling £4.56m to MTCBC primarily in relation to the payroll and Service Level Agreements and the remainder being in relation to business rates and other costs. Included in debtors is £9,922 which includes a prepayment on an annual maintenance agreement. Included in creditors is £345,530 relating to payroll costs and Service Level Agreements and included in creditors > 1 year is £313,901 relating to the environmental warranty; all due to MTCBC.

29) Provisions for liabilities

VR / VERAs at 31 March 2016 we have issued 9 voluntary redundancy / early retirement notices whichtakeeffectonorbefore31May2016.WHQS WorksUnder the transfer agreement the Council transferred the properties to MVH together with an obligation to undertake the WHQS works at the Council’s expense. The price paidforthepropertieswas£133,023,642;thispricereflectstheTenantedMarketValue of the stock which is nil and the estimated value of the works of £133,023,642. At 31 March 2016 £71.592m (2015: £78.732m) is shown in Debtors: amounts falling due after one year and in provisions for liabilities.

At beginning of yearProvided for during the yearUsed during the yearReleased during the yearTransferred to creditorsAt the end of the year

VR/VER£’000

-220

---

220

WHQS Works£’000

78,732--

(7,140)-

71,592

2016£’000

78,732220

-(7,140)

-71,812

2015£’000

87,98510

-(9,243)

(20)78,732

www.mvhomes.org.uk

55


Assumption31 March 2016

(% p.a.)31 March 2015

(% p.a.)

Discount rate 3.5% 3.3%

RPIinflation 2.9% 3.0%

CPIinflation 1.8% 1.9%

Increase to pensions in payment 1.8% 1.9%

Increase to deferred pensions 1.8% 1.9%

General rate of salary increases 3.3% 3.4%

Financial assumptions for valuing the funded LGPS Liabilities

30) Events after the Reporting DateThere are no events after the reporting date.

Merthyr Valleys Homes’ employees are eligible to join the RCTCBC Pension Fund, which is a local government pension scheme (LGPS). MVH was admitted to the scheme on 30 March 2009. This disclosure relates to the period between 1 April 2015 and 31 March 2016.

TheLGPSisafundeddefinedbenefitscheme,withassetsheldinaseparatetrusteeadministered fund. Contributions in the year totalled £642,746 of which employers contributions totalled £358,969 and employees totalled £283,777.

InaccordancewiththerequirementsofFRS102thepensionfundisvaluedbyaqualifiedindependentactuaryinordertoascertainthevalueoftheschemeandtheprevious year has been restated accordingly.

Contributions for the year ended 31 March 2017Regular employer contributions to the fund for the year ended 31 March 2017 are estimated to be £283,000.

AssumptionsThe latest actuarial valuation of the fund liabilities took place as at 31 March 2013. Liabilitieshavebeenestimatedbytheindependentqualifiedactuaryonanactuarialbasis using the projected unit credit method. The principle assumptions used were:.

31) Pension Costs

www.mvhomes.org.uk

56


Asset allocation

Asset class Value at31 March 2016

Value at31 March 2015

Equities 70.1% 69.0%

Property 6.4% 5.6%

Government bonds 9.2% 9.7%

Corporate bonds 10.6% 11.7%

Cash 3.7% 4.0%

Other 0.0% 0.0%

Males 31 March 2016 31 March 2015Future lifetime from age 65 (currently aged 65)Future lifetime from age 65 (currently aged 45)

23.125.3

23.025.2

Females 31 March 2016 31 March 2015Future lifetime from age 65 (currently aged 65)Future lifetime from age 65 (currently aged 45)

26.028.4

25.928.3

Mortality assumption at 31 March 2016 and 31 March 2015

The split of the liabilities at the last valuation between the various categories of members

Active members 71.0%Deferred pensioners 7.0%Pensioners 22.0%

Amounts recognised in other comprehensive income

31 March 2016£M’s


Assets gains / (losses) arising during the period 0.071 2.545

Liability gains / (losses) arising during the period 1.808 (3.018)

Total amount recognised in other comprehensive income 1.879 (0.473)

www.mvhomes.org.uk

57


Reconciliation of funded status to Financial Position

31 March 2016(% p.a.)

31 March 2015(% p.a.)

Fair value of assets 29.934 28.600

Presentvalueofpresentdefinedbenefitobligation

25.074 25.063

Net pension asset 4.860 3.537

Changes to fair value of assets



Opening fair value of assets 28.600 24.627Interest income on assets 0.949 1.091

Remeasurement gains / (losses) in assets 0.071 2.545

Contributions by the employer 0.359 0.486

Contributions by participants 0.284 0.271

Netbenefitspaidout (0.329) (0.420)

Netincreaseinassetsfromdisposals/aquisitions 0.000 0.000

Settlements 0.000 0.000

Closing fair value of assets 29.934 28.600

Changes to present value of the defined benefit obligation



Opening present value of liabilities 25.063 20.419Current service costs 1.037 0.815

Interest expense 0.827 0.896

Contributions by participants 0.284 0.271

Actuarial losses / (gains) on liabilities (1.808) 3.018

Netbenefitspaidout (0.329) (0.420)

Past service costs 0.000 0.064

Curtailments 0.000 0.000Netincreaseinliabilitiesfromdisposals/aquisitions 0.000 0.000

Settlements 0.000 0.000

Closing defined benefit obligation 25.074 25.063




Interest income on assets 0.949 1.091

Gain / (losses) on assets 0.071 2.545

Actual return on assets 1.020 3.636

Actual return on assets

59

ww

w.m

vho

mes

.org

.uk

Inta

ng

ible

ass

ets

Pro

pertyPlant&Equipment

-Co

st-

Do

wry

gap

fu

nd

ing

an

d o

the

r g

ran

ts-

De

pre

cia

tio

n

Otherfixe

dassets

Inve

stm

en

t p

rop

ert

ies

Inve

nto

rie

sD

eb

tors

- a

mo

un

ts f

allin

g d

ue

wit

hin

on

e y

ear

De

bto

rs -

am

ou

nts

fal

ling

du

e a

fte

r o

ne

ye

arCas

handcas

hequivalents

Cre

dit

ors

- a

mo

un

ts f

allin

g d

ue

wit

hin

on

e y

ear

Do

wry

gap

fu

nd

ing

an

d o

the

r g

ran

ts -

am

ou

nts

fa

llin

g d

ue

wit

hin

on

e y

ear

Pe

nsi

on

ass

et

Tota

l ass

ets

less

cu

rre

nt

liab

iliti

es

Cre

dit

ors

- a

mo

un

ts f

allin

g d

ue

aft

er

mo

re t

han

on

e y

ear

Do

wry

fu

nd

ing

an

d o

the

r g

ove

rnm

en

t g

ran

ts -

am

ou

nts

fal

ling

du

e a

fte

r m

ore

th

an o

ne

ye

arP

rovi

sio

ns

for

liab

iliti

es

Net

ass

ets

Shar

e c

apit

alR

eve

nu

e r

ese

rve

Pe

nsi

on

re

serv

eB

ig L

ott

ery

Fu

nd

re

serv

eLe

ase

ho

lde

r si

nki

ng

fu

nd

UK

GA

AP

as

pre

vio

usl

y re

po

rted

£’0

00 -

45

,12

1(2

1,9

89

)(1

,92

0)

21,

212

1,0

00 -

22

,212 9

1,4

08 -

86

6

(5,1

80

) -

4,2

08

23

,52

3(1

7,13

4) -

(10

)

6,3

79

-2

,072

4,2

08 5

94

6,3

79

Inta

ng

ible

as

sets

£’0

00

42

5

(42

5) - -

Rec

og

nit

ion

o

f In

vest

men

t p

rop

erti

es£

’00

0

89

7

89

7

89

7

89

7

Pre

sen

tati

on

of

gra

nts

wit

hin

cr

edit

ors

an

d

reca

lcu

late

d

dep

reci

atio

n£

’00

0

21,

98

9(3

,78

4)

(1,1

37)

(17,

43

3)

(36

5)

(36

5)

(36

5)

(2)

Rec

og

nit

ion

of

Fin

ance

Lea

ses

£’0

00

214

(115

)

(116

)

(17)

(17)

(17)

(18

4)

Fair

val

uat

ion

o

f n

on

-bas

ic

fin

anci

al

inst

rum

ents

lo

an£

’00

0

(1,0

31)

(1,0

31)

(1,0

31)

(1,0

31)

Rec

og

nit

ion

o

f V

AT

Sh

elte

r£

’00

0

87,

975

(87,

975

) - -

Leas

e h

old

er

sin

kin

g

fun

d£

’00

0

(94

)

(94

)

(94

)

(94

)

No

tes

to t

he

Fin

anci

al S

tate

men

ts Ye

ar e

nd

ed

31

Mar

ch

20

16

Rec

on

cilia

tio

n o

f n

et a

sset

s an

d r

eser

ves

at 1

Ap

ril 2

014

- d

ate

of

tran

siti

on

to

FR

S10

2

An

nu

al

leav

e ac

cru

al£

’00

0

(72

)

(72

)

(72

)

(72

)

(18

4)

FRS1

02

£’0

00

42

5

45

,12

1 -(5

,70

4)

39

,84

278

98

97

41,

52

8 91,

40

88

7,9

758

66

(5,3

67)

(1,1

37)

4,2

08

129

,49

0(1

8,3

75)

(17,

43

3)

(87,

98

5)

5,6

97 -

1,4

84

4,2

08 5 -

5,6

97

(10

8)

(10

8)

(10

8)

(10

8)

32

) Tra

nsi

tio

n t

o F

RS1

02

Thisisthefirstye

arthatM

VHhas

prese

nteditsfinan

cialstatementunderFinan

cialR

eportingStandard102(FR

S10

2)issu

edbytheFinan

cialR

eportingC

ouncil.The

follo

wingdisclosu

resarerequiredin

theyearoftran

sition.T

hela

stfinan

cialstatementsunderpreviousUKG

AAPw

erefortheyearended31March2015

andthedateof

tran

sitiontoFRS1

02w

astherfore1April2

014

.Asaconse

quenceofad

optingFRS1

02,a

numberofac

countingpolic

ieshav

echan

gedtocomplyw

iththatstandard.

In c

arry

ing

ou

t th

e t

ran

siti

on

to

FR

S 10

2, M

VH

has

no

t ap

plie

d a

ny

of

the

op

tio

nal

exe

mp

tio

ns

as p

erm

itte

d b

y Se

cti

on

35

Tra

nsi

tio

n t

o t

his

FR

S.

60

ww

w.m

vho

mes.o

rg.u

k

Intan

gib

le asse

tsPro

pertyP

lant&

Equipment

-Co

st- D

ow

ry gap

fun

din

g an

d o

the

r gran

ts- D

ep

rec

iation

Otherfi

xedasse

tsIn

vestm

en

t pro

pe

rties

Inve

nto

ries

De

bto

rs - amo

un

ts falling

du

e w

ithin

on

e ye

arD

eb

tors - am

ou

nts fallin

g d

ue

after o

ne

year

Cash

andcash

equivale

nts

Cre

dito

rs - amo

un

ts falling

du

e w

ithin

on

e ye

arD

ow

ry fun

din

g an

d o

the

r go

vern

me

nts g

rants

- amo

un

ts falling

du

e w

ithin

on

e ye

ar

Pe

nsio

n asse

tTo

tal assets le

ss cu

rren

t liabilitie

sC

red

itors - am

ou

nts fallin

g d

ue

after m

ore

than

on

e ye

ar

Do

wry fu

nd

ing

and

oth

er g

ove

rnm

en

t gran

ts - am

ou

nts fallin

g d

ue

after m

ore

than

on

e ye

arP

rovisio

ns fo

r liabilitie

s

Net assets

Share

cap

italR

eve

nu

e re

serve

Dig

ital Me

rthyr re

serve

Pe

nsio

n re

serve

Big

Lotte

ry Fun

d re

serve

Lease

ho

lde

r sinkin

g fu

nd

UK

GA

AP

as p

reviou

sly rep

orted

£’0

00-

56

,38

0(2

5,9

41)

(3,4

05

)2

7,03

41,0

75-2

8,10

921

1,25

6-4

,00

2

(4,8

52

)-

3,5

37

32

,073

(24

,178)--

7,89

5-4

,22

72

23

,53

7110

87,8

95

Intan

gib

le assets£

’00

03

74

(374

)--

Reco

gn

ition

o

f Investm

ent

pro

perties£

’00

0

89

7

89

7

89

7

89

7

Presen

tation

of

gran

ts with

in

credito

rs and

recalcu

lated

dep

reciation

£’0

00

25

,94

1(5

,06

9)

(1,25

9)

(20

,017)

(40

4)

(40

4)

(40

4)

(2)

Reco

gn

ition

o

f Finan

ce Leases£

’00

0

105

(104

)

(13)

(12)

(12)

(12)

(184

)

Fair valuatio

n

of n

on

-basic

fin

ancial

instru

men

ts lo

an£

’00

0

(1,214

)

(1,214

)

(1,214

)

(1,214

)

Reco

gn

ition

o

f VA

T

Shelter

£’0

00

78,73

2

(78,73

2)--

Lease h

old

er sin

king

fu

nd

£’0

00

(108

)

(108

)

(108

)(10

8)

No

tes to th

e Finan

cial Statemen

ts Ye

ar en

de

d 3

1 Marc

h 2

016

Reco

nciliatio

n o

f net assets an

d reserves at 1 A

pril 2

015

An

nu

al leave

accrual

£’0

00

(75)

(75)

(75)

(75)

(184

)

FRS10

2£

’00

03

74

56

,38

0-(8

,474

)4

8,2

80

80

68

97

49

,98

321

1,25

678

,732

4,0

02

(5,0

31)

(1,25

9)

3,5

37

131,2

41

(25

,513

)

(20

,017)

(78,73

2)

6,9

79-3

,4192

23

,53

71-6

,979

(108

)

(108

)

(108

)

(108

)

61

ww

w.m

vho

mes

.org

.uk

Turn

ove

rO

pe

rati

ng

co

sts

Op

era

tin

g s

urp

lus

Surplusonsaleoffixe

dassets

Inte

rest

re

ce

ivab

le a

nd

sim

ilar

inc

om

eIn

tere

st p

ayab

le a

nd

sim

ilar

ch

arg

es

Mo

vem

en

t in

fai

r va

lue

of

inve

stm

en

t p

rop

ert

ies

Move

mentinfairva

lueoffinan

cial

inst

rum

en

ts

Surp

lus

be

fore

tra

nsf

ers

to

re

serv

es

Ac

tuar

ial l

oss

on

pe

nsi

on

sc

he

me

To

tal c

om

pre

hen

sive

inco

me

for

the

year

UK

G

AA

P a

s p

revi

ou

sly

rep

ort

ed£

’00

0

15,6

95

(12

,29

4)

3,4

01

40

9 8(1

,29

3) - -

2,5

25

(1,0

09

)

1,5

16

Rec

alcu

late

d

dep

reci

atio

nan

dam

ort

isat

ion

of

gra

nts

£’0

00

1,2

46

(1,2

85

)

(39

)

Rec

og

nit

ion

o

f fi

nan

cele

ases

£’0

00 13 (8) 5

An

nu

al

leav

e ac

cru

al£

’00

0 (2)

(2)

Fair

va

luat

ion

of

no

n-b

asic

fi

nan

cial

in

stru

men

tslo

an£

’00

0

(18

4)

(18

4)

Pen

sio

n

adju

stm

ent

£’0

00

(73

1)

195

53

6 -

Leas

e h

old

er

sin

kin

g

fun

d£

’00

0

(14

)

(14

)

FRS1

02

£’0

00

16,9

27

(14

,29

9)

2,6

28

40

92

03

(1,3

01) -

(18

4)

1,75

5

(473

)

1,2

82

No

tes

to t

he

Fin

anci

al S

tate

men

ts Ye

ar e

nd

ed

31

Mar

ch

20

16R

eco

nci

liati

on

of

tota

l co

mp

reh

ensi

ve in

com

e fo

r th

e ye

ar e

nd

ed 3

1 M

arch

20

15

www.mvhomes.org.uk

62

www.mvhomes.org.uk

62


Intangible assetsComputer software, with a net book value of £425,000 at 1 April 2014, has been reclassifiedfromotherpropertyplantandequipmenttointangibleassetsasrequiredunderFRS102.Thishasnoeffectonthenetassets nor on the surplus for the year, except that the previous depreciation charge is now described as amortisation.

Investment propertiesFRS102requirespropertiesheldtoearn commercial rentals or for capital appreciationtobeclassifiedasinvestmentproperties. This has resulted in MVH classifying its commercial shops (excluding those used for charitable or community purposes) as investment properties. These have been valued by an independent valuer and recognised in the accounts at valuation, with any change in value recognised in the Statement of Comprehensive Income annually. This adjustment has resulted in an increase to our opening reserves position of £897,000.

Government grantsGovernment grants now appear within liabilities in the Statement of Financial Position, having previously been deducted directly from the gross costs of the assets they were used to fund. This has the impact of increasing the depreciation charges as these are now calculated against the gross cost of assets. This increase is partially offsetintheStatementofComprehensiveIncome by amortisation applied to the gross grant liability balances. The impact of these changes on the 2015 results is a net charge of £39,000.

Finance LeasesFRS102requiresconsiderationofagreements that transfer the right to use assets, based on the substance of the arrangement. This has resulted in the reclassificationofanumberofleasesfromoperatingleasestofinanceleases.Thisadjustmenthasincreasedotherfixedassets by £105,000 (2014: £214,000) and financeleasecreditorsby£117,000(2014:£231,000). The impact on the Statement of Comprehensive Income for 2015 is a net increase of £5,000.

Annual leave accrualFRS102requiresshorttermemployeebenefitstobechargedinsurplusordeficitto the Statement of Comprehensive Income as the employee service is received. This has resulted in MVH recognising a liability for holiday pay of £73,000 on transition to FRS102. Previously holiday pay accruals were not recognised and were charged to the Income and Expenditure Account as they were paid. In the year to 31 March 2015 an additional charge of £75,000 was recognised in the Statement of Comprehensive Income and the liability at 31 March 2015 was £75,000.

Financial instrument – LoanThis adjustment relates to the recognition of the fair value of our loan facility. The loan agreement gave RBS the option to canceloneofthefixedrateagreementson 31 March 2015 which it chose not to do.Consequently,thiselementoftheloan(£8m) has been fair valued as a non-basic loan in line with FRS102 up to 31 March 2015 and valued as a basic loan after that date. This has resulted in a decrease to the opening reserves position of £1,031,000 and a decrease to the reserves position at 31 March 2015 of £1,214,000.

.

www.mvhomes.org.uk

63


VAT ShelterThis adjustment relates to the recognition on the Statement of Financial Position of the VAT shelter agreement. Under the transfer agreement the Council transferred the properties to MVH together with an obligation to undertake the WHQS works at the Council’s expense. The price paid for the properties was £133,023,642; this price reflectstheTenantedMarketValueofthestock which is nil and the estimated value of the works of £133,023,642. At 31 March 2015 £78,732,000 (2014: £87,975,000) is shown in Debtors:amounts falling due after one year and in Provisions for liabilities.

Pension AdjustmentUnder previous UK GAAP MVH recognised anexpectedreturnondefinedbenefitplan assets in the Income and Expenditure Account. Under FRS102 a net interest expense,basedonthenetdefinedbenefitasset/liability, is recognised in surplus or deficitintheStatementofComprehensiveIncome.Theeffectofthechangehasbeento reduce the surplus for the year in the year to 31 March 2015 by £536,000 and increase the credit in other comprehensive income byanequivalentamount.

Leaseholder sinking fundUnder SORP 2014, where leaseholders pay inadvanceforidentifiedfutureplannedormajor works, any unutilised contributions are recognised as a liability in the Statement of Financial Position. This adjustment has increased Creditors: amounts falling due after more than one year and reduced Restricted reserves by £376,000 (2015: £108,000).

Other adjustments arising on transition to FRS102In addition to the transition adjustments identifiedabovewhichaffectthesurplusforthefinancialyear,thefollowingadjustmentshavearisenwhichhavehadnoeffectonnetreserves or Statement of Comprehensive Incomebutwhichhaveaffectedthepresentation of the accounts. The main items are:

Statementofcashflows–thecashflowstatementreflectsthepresentationrequirementsofFRS102,whichisdifferentto that prepared under FRS1. In addition the cashflowstatementreconcilestocashandcashequivalentswhereasunderpreviousUKGAAPthecashflowstatementreconciledtocash.Cashandcashequivalentsaredefinedin FRS102 as ‘cash on hand and demand depositsandshorttermhighlyliquidinvestments that are readily convertible to known amounts of cash and that are subject toaninsignificantriskofchangesinvalue’whereascashisdefinedinFRS1as‘cashinhand and deposits repayable on demand withanyqualifyinginstitution,lessoverdraftsfromanyqualifyinginstitutionrepayableondemand’.TheFRS1definitionismorerestrictive.

Merthyr Valleys Homes Ltd. MartinEvansHouse,RiversideCourt,AvenuedeClichy,MerthyrTydfilCF478LD

Financial Statements - MVHomes · renovations of Taf Fechan House and to create a new Housing...

Documents

Transcript of Financial Statements - MVHomes · renovations of Taf Fechan House and to create a new Housing...