LIVERPOOL MUTUAL HOMES LIMITED - LMH Group MUTUAL HOMES LIMITED Year ended 31 March 2017 5 Name LMH...

LIVERPOOL MUTUAL HOMES LIMITED Year ended 31 March 2017

1

Registered Co-operative and Community Benefit Society No 29998R

Registered Housing Association No L4524

Consolidated Financial Statement and Directors’ Report For Liverpool Mutual Homes Limited Year Ending 31 March 2017


2

Contents

Board Members, Executive Directors, Advisors and Bankers .......................................................... 3Executive Team Information ............................................................................................................ 5Strategic Report .............................................................................................................................. 6Report of the Board ....................................................................................................................... 36Independent auditor's report to the members of Liverpool Mutual Homes Limited ......................... 46Consolidated Statement of Comprehensive Income ...................................................................... 47Association Statement of Comprehensive Income ........................................................................ 48Consolidated Statement of Changes in Reserves ......................................................................... 49Consolidated Statement of Financial Position ............................................................................... 50Association Statement of Financial Position .................................................................................. 51Consolidated Cash Flow Statement .............................................................................................. 52Notes to the Financial Statements................................................................................................. 53


3

Board Members, Executive Directors, Advisors and Bankers

Board Board members are recruited for their skills and knowledge, including professional, commercial and local experience. The Board is supported by four Committees:

� Group Remuneration and Nominations Committee;

� Group Audit and Risk Committee;

� Social Landlord Operations Committee; and

� Assets and Investment Committee (Committee disbanded 1st April 2017)

Board member

Type Board Group Remuneration

and Nominations Committee

Group Audit and

Risk Committee

Social Landlord

Operations Committee

Assets and

Investment Committee

Bill Lacey Independent Chair � � �

Retired 31st

March 2017

Bruce Johnson Independent � � Chair

Retired 19th Sept

2016

Andy Catterall Independent � Chair �

Retired 1st

April 2016

Greg Gottig Independent � Chair � � �

Paula McGrath Independent � � �

Will Roby Tenant Vice Chair � Chair �

Tommy Colleran Tenant � � �

Retired 31st

March 2017

Jane Mason Tenant � � �

Retired 31st

March 2017

Teri Wilson Tenant � � �Retired

19th Sept 2016

Ray Jones Tenant � � �

Sue Fitzgerald Tenant � � Chair

Retired 19th Sept

2016

Teresa Kennimouth Tenant � � �

Retired 14th April

2016

LIVERPOOL MUTUAL HOMES LIMITEDYear ended 31 March 2017

4

Board member

Type Board GroupRemuneration

andNominationsCommittee

GroupAudit and

Risk Committee

Social Landlord

Operations Committee

Assets and

Investment Committee

Gordon Hood IndependentAppointed

1st April 2016

Sarah Jane Saunders

Appointed19th Sept

2016

Paul Burns BoardMember Chair

Appointed1st April 2017

Steve CoffeyExecutive

BoardMember

Appointed28th April

2017

Andrew Gray Co-optee

Co-optee on AIC

until 28th

April2017.

Appointedto the Board

from 28th

April 2017

Cllr SharonConnor Co-optee

Appointed20th July

2016

Cllr Leon Tootle Co-optee

Appointed20th July

2016NeilGarnham Co-optee

WayneHughes HMS Chair

Attendance

A register of attendance for Board and Committees is maintained to ensure that members are ableto commit sufficient time to allow them to be effective in their roles. Attendance for Board andCommittees for 2016/17, from the date of their appointment, is set out below. It should be notedthat two Board members suffered ill health during the year, which affected overall attendancefigures.

Name LMH Board GroupRemuneration and Nominations Committee

Group Audit and RiskCommittee

Social Landlord OperationsCommittee

Assets and InvestmentCommittee

Bill Lacey 100% (7 of 7) 100% (5 of 5) 50% (2 of 4) 50% (2 of 4) Will Roby 86% (6 of 7) 100% (5 of 5) 100% (4 of 4) 100% (4 of 4)Tommy Colleran 16% (1 of 7) 40% (2 of 5) 0% (0 of 4)Ray Jones 100% (7 of 7) 100% (5 of 5) 100% (4 of 4) 100% (4 of 4) 100% (4 of 4) Teri Wilson 100% (3 of 3) 50% (1 of 2) 100% (2 of 2) Sue Fitzgerald 33% (1 of 3) 100% (3 of 3) 100% (2 of 2) Greg Gottig 100% (7 of 7) 100% (5 of 5) 100% (4 of 4) 50% (2 of 4)Paula McGrath 86% (6 of 7) 75% (3 of 4)


5

Name LMH Board Group Remuneration and Nominations Committee

Group Audit and Risk Committee

Social Landlord Operations Committee

Assets and Investment Committee

Bruce Johnson 0% (0 of 3) 67% (2 of 3) 50% (1 of 2) Gordon Hood 86% (6 of 7) 50% (1 of 2) 100% (4 of 4) Sarah Jane Saunders

50% (2 of 4) 75% (3 of 4) 50% (2 of 4)

Jane Mason 14% (1 of 7) 0% (0 of 4) 0% (0 of 4) Wayne Hughes 80% (4 of 5) 100% (4 of 4) Neil Garnham 100% (4 of 4) Andrew Gray 50% (2 of 4)

Advisors and Bankers

Registered Office The Observatory 1 Old Haymarket Liverpool, L1 6RA

External Auditors Grant Thornton UK LLP Chartered Accountants and Registered Auditors 4 Hardman Square Spinningfields Manchester, M3 3EB

Solicitors Brabners LLP Horton House Exchange Flags L2 3YL

Bankers Barclays Bank plc Liverpool Lord Street Branch 48b & 50 Lord Street Liverpool, L2 1TD

Executive Team Information

Steve Coffey, Chief Executive

Leads the overall LMH Group Executive Management Team in ensuring that the Group’s strategic objectives are delivered and service provision meets the highest standards.

Angela Forshaw, Executive Director (Operations)

Responsible for LMH housing management services, including supported living, safer estates, property services, community regeneration and customer involvement services.

Peter Fieldsend, Executive Director (Resources) and Company Secretary

Responsible for performance management, governance, communications, information technology, people services, development and finance.


6

Strategic Report

Liverpool Mutual Homes Limited (“LMH” or “the Association”) is a not-for-profit Registered Providerof social housing administered by a voluntary Board. The Association began trading on 1st April 2008 following the transfer of 15,026 properties from Liverpool City Council (“LCC” or “the Council”) on that date.

LMH Group (or “the Group”) comprises LMH and its three subsidiary undertakings:

Housing Maintenance Solutions Limited (“HMS”), which began trading on 4th July 2011 and provides building, repairs and maintenance operations for LMH and external clients; LMH Developments Limited (“LMHD”), which was incorporated on 15th July 2015 andcommenced trading in 2016/17 as the Group’s new housing development company; andComMutual, a registered charitable venture set up in January 2017 to provide support toLMH tenants and communities across the Liverpool region, incorporating the existing charityThe Toxteth Fire Fit Hub (“TFFH”).

Turnover the Association was £74.7m (2016: 72.8m) with a surplus for the year £19.7m (2016:£13.7m).

LMH is a public benefit entity.

Nature of Business

LMH is a registered provider of 15,316 homes available for social and affordable rent (15,334properties in total, including shared ownership homes). In 2012/13, LMH embarked on its firstAffordable Homes programme in conjunction with the Homes and Communities Agency (“HCA”),and at 31st March 2017, 1,351 (2016: 891) of these properties were rented at affordable rent.

LMH is a Co-operative and Community Benefit Society. Since the stock transfer, LMH has made asignificant investment into the physical condition of its properties and in core services and projects designed to address issues such as unemployment, poverty, crime, anti-social behaviour and social exclusion. LMH's vision is ‘to have Pride in our homes and be Proud of ourneighbourhoods’.

LMH is the largest social housing landlord operating within the City of Liverpool. Through itshousing development partnerships the Association is extending housing stock numbers bydeveloping new-build schemes across the Liverpool City Region, including expansion intoKnowsley and the Wirral.

LMH stock is largely concentrated in areas of the most severe deprivation. The stock in the northof the City is more concentrated in specific areas whereas stock in the south is more dispersed.Although LMH has homes in 29 of the City’s 30 electoral Wards, the majority of its homes areconcentrated in the inner core of Liverpool. There is a stark correlation between LMH stock andthe most deprived Lower Super Output Areas (LSOAs) as defined by the Office of NationalStatistics, with 3,671 (24%) of LMH homes located in the 1% most deprived areas.


7

The stock is made up of:

Percentage of stock

Type of Property Percentage% stock Age of Property

45 3 Bed House 1 <1919 22 1 Bed Flat 33 1919 – 1960 10 2 Bed House 62 1961 – 2008 7 2 Bed Flat 4 >2008 8 Bungalow 4 4+ Bed House 4 Other

There has been an increase in Right to Buy Sales in 2016/17 (100 properties sold compared to 82 in 2015/16). The overall stock number has increased during the period with 245 units being brought into ownership.

As at 31st March 2017, 13,179 properties were general needs, 1,351 were affordable rent, 64 were temporary housing, 18 were shared ownership and 722 were housing for older people.

Housing Maintenance Solutions Limited

Housing Maintenance Solutions Limited is a wholly-owned subsidiary of LMH (Company Registration No.7237932) and was established in July 2011. HMS undertakes construction, repair and maintenance operations for LMH and other third party clients, including other housing associations, commercial enterprises and public sector organisations.

HMS operates within the LMH VAT Group. Turnover for 2016/17 was £25.7m.

LMH Developments Limited

LMH Developments Limited (Company Registration No: 09687200) is a development company delivering new-build housing development and major refurbishment services on behalf of the Group and was established in July 2015. This wholly-owned subsidiary supports the delivery of the Group’s development strategy across the Liverpool City Region, together with strategic housing partnership agreements with Liverpool City Council and Knowsley Borough Council.

LMH Developments began trading in 2016/17, with turnover of £10.8m.

ComMutual

In January 2017, LMH set up a charitable venture “ComMutual” to support LMH tenants and communities within the Liverpool region. LMH acquired the existing charity Toxteth Fire Fit Hub (TFFH), which now operates as part of ComMutual. In 2016/17, the charity received income of £2.4m, including a one-off investment from LMH.

LMH Group

The Group Structure arrangement supports the independence of Group members within a single operating model. The arrangement is sufficiently flexible to allow each member of the Group to play a full part in delivering the objectives of the overall Group and its shared social purpose.

The Group had a turnover of £76.0m in 2016/17 (2016: £72.7m) and employed 571 staff (2016: 600). Key achievements delivered in 2016/17 will be detailed within specific sections of this report.


8

Corporate Objectives

The Group works to a Corporate Plan, which sets out its goals and aspirations over the five-year period from 2015/16 to 2019/20. At the end of this period the Group will expect to have built furtherupon the Vision of the landlord (and associated) activities to have ‘Pride in Our Homes’ and be‘Proud of Our Neighbourhoods’. Equally, the Group’s contracting activities carried out by HMSwill expect to have enhanced its vision: ‘To be a Leading Maintenance and ConstructionServices Provider in the North West’.

The Group’s key areas of activity are:

The Corporate Core; Landlord Operations;Contracting Operations;Assets and Development Operations; andSocial Operations.

A series of medium-term goals and aspirations have been set out for each of these operational areas. These objectives seek to deliver an element of the three Focuses within LMH’s Corporate Plan.

The five-year goals within each of the above key areas of activity are:

The Corporate Core

Focus on Viability and Strength

Establish plans to secure LMH as a highly efficient registered provider delivering new homes and services whilst achieving a margin of 50% (EBITDA, Earnings Before Interest, TaxDepreciation and Amortisation) in the medium term. Have in place a workforce that is fully skilled to meet the needs of the business,inspirationally led, and supported by efficient infrastructure and systems;Maximise social dividend to increase investment through the Social Dividend InvestmentFund;Explore opportunities for diversification, regularly review the Corporate Governance structureand arrangements that support diversification whilst managing risk and maximising returns;Ensure all activities are suitably branded to support the strategic aims of the Group andensure that they are relevant in their specific markets;Taking all circumstances into consideration, continuously improve the Value For Money provided by the Group; and,Ensure that suitable funding arrangements are in place to support the strategic aspirations ofthe Group whilst managing risk effectively.

Focus on Enterprise and Growth

Increase the number of homes managed to over 30,000 through suitable merger and partnership development opportunities within the North West.


9

Focus on Communities and Customers � Establish a suitable vehicle, or mechanism, to deliver non-housing social activities through

the creation of a registered Charity member of the Group; and, � Establish a suitable company, vehicle, or mechanism, to deliver services within the Private

Rented Housing Sector.

Landlord Operations Focus on Viability and Strength � Establish LMH as the regional landlord of choice.

Focus on Enterprise and Growth � Provide high quality housing management and maintenance services to customers in the

Private Rented Housing Sector (which are popular within their target markets); and, � Develop the breadth of the LMH housing offer, across a range of market segments, by

increasing our housing with support schemes and making affordable services available to a wider customer base.

Focus on Communities and Customers � Have in place flexible and responsive management arrangements to suit all tenure types. Contracting Operations

Focus on Viability and Strength � Increase the profitability of the business to maximise the potential for gift aid within the

Group; and, � Develop a multi skilled workforce maximising sustainable direct involvement able to support

the delivery and aspirations of the Group. Focus on Enterprise and Growth � Grow revenues by a minimum of 30% through non-LMH clients to increase the client base; � Develop New Build and Development work-streams; � Develop a Facilities Management Service offering to new and existing client bases; and, � Develop affordable construction and maintenance services for the Private Rented Sector and

domestic Owner Occupier markets. Focus on Communities and Customers � Become established as a leading regional Independent Construction and Maintenance

Company with clear community and customer based values; and, � Maximise local supply chain and manufacturing opportunities to contribute to the groups

wider social value aims.


10

Assets and Development Operations

Focus on Viability and Strength Further develop the Group’s commercial approach to active asset management by

embedding the use of IPD to maximise return on assets; and, Deliver a comprehensive approach to the sustainability of assets and places through sound

investment. Focus on Enterprise and Growth

Build a further 1,500 new homes in excess of the current 1,200 unit Development

Programme; Broaden the housing offer provided by the Group by establishing LMH in the sales, shared

ownership and private rented markets; Establish LMH as an active housing developer outside of Liverpool; and Develop specialist in house construction services to reduce reliance on consultants and

market externally.

Focus on Communities and Customers Improve energy efficiency of stock to meet carbon reduction targets and increase use of

renewable energy by maximising available funding opportunities; and, Provide a dynamic repairs service which offers a first class service to our customers and

communities.

Social Operations Focus on Viability and Strength Establish a registered charity within the Group which is a financially robust organisation to

deliver non housing activities without any risk to social housing assets. Focus on Enterprise and Growth Achieve maximum impact for customers of investment from Group commercial activities by

using the resources to secure additional funding. Focus on Communities and Customers

Develop a rich and diverse offer of non-housing related activity that supports and empowers

communities whilst supporting the core business by maximising income and protecting investments; and,

Through a Social Dividend Investment Fund deliver a comprehensive range of training, employment, health, financial inclusion, youth engagement and digital inclusion projects to support our customers in achieving their full potential.

In addition to this, a specific set of similar goals has been developed which comprise LMH’s annual Operational Plan.


11

LMH has a strong commitment to improve services for customers, to make its services more accessible and to be as efficient as possible. Whilst the goals and aspirations of the Group are set out in the Corporate Plan 2015/16 – 2019/20, the Group’s Operating Model is flexible in order for it to adapt to any circumstances and to evolve and respond to changes in the operating environment. It is formed around core principles, which are at the heart of what the Group and its independent members are trying to achieve together. These core principles help drive efficiencies and create ‘social dividend’ by simplifying and sharing approaches across the Group. They also create a level of service consistency for LMH customers.

These principles are known as ‘Design Principles’ and establish a framework of value based undertakings, service related commitments, and other financial, organisational and operational statements that determine how the model operates and how the independent organisations within the model work towards shared goals and aspirations.

The Design Principles act as a guide to the design and development of the future Operating Model. They will also be used in the future, as more changes take place to the Group’s operating environment, to ensure that the operating model remains fit for purpose in the long term.

The established Design Principles are categorised into the following key areas: Customer Experience; Service Delivery; Support Services; People; Technology; and Corporate Core.

Performance

The tables below highlight key performance trends, which LMH monitors on a monthly basis.

Lettings Management Void Management 2013/14 2014/15 2015/16 2016/17 Target

2016/17 Target 2017/18

Percentage Void Rent Loss 1.27% 1.12% 0.95% 0.77 1.2% 0.75%

Average Void Relet Times 30.8 days

49.12 days

49.6 days 43.5 days 50 days 40

days

LMH maintains a strong performance in allocations and lettings. Despite the continuing challenges presented by welfare reform, such as bedroom tax and the benefit cap, performance improved again in 2016/17.

Void relet times performed well against a target that was set to reflect inclusion of capital works in the calculation of the indicator. The target set for void rent loss was exceeded, improving on the previous year's performance. The total number of voids received in the year was 968, 6 less than the previous year and resulting in an annual void turnover of 5.35%. This was attributable to the positive impact of LMH's pre-tenancy service and the high standard of LMH's improvement works.

There continues to be a demand issue for flats in some areas, particularly in the North where numbers are concentrated and for larger flats in the South of the city. LMH has completed extensive refurbishment works to the communal areas of its 17 sheltered schemes, improving sustainability, and made use of the web-based letting agency Zoopla to assist in identifying tenants for less popular properties. LMH recognises the importance of ensuring this critical business area maintains effective and efficient service delivery; results continue to demonstrate a high performance focus and progressive culture.


12

Rent Arrears and CollectionCurrent Tenant Rent

Arrears 2013/14 2014/15 2015/16 2016/17 Target 2016/17

Target 2017/18

Percentage of Current Tenant Arrears 4.55% 4.45% 4.25% 3.52% No Target No Target

Current tenant rent arrears at year-end 2016/17 was £2.4m, equivalent to 3.52% of the rent roll, areduction of £0.4m, equivalent to 0.73% from the previous year. LMH utilises this indicator formonitoring and data information purposes, and does not set an annual target, the focus being primarily on the rental income collection target. An overall target is not set for this KPI, howeverLMH aims to achieve the Housemark upper quartile target of 1.69%

The focus of this KPI is a continuing reflection of the “Rent First” initiative and whole organisationaldrive on supporting income collection and arrears recovery, which is supported by LMH’s welfarerights advice services and the work done to mitigate the worst impacts of welfare reforms. However, LMH recognises that the cumulative impact of successive waves of welfare reforms andthe increasing momentum around the roll-out of Universal Credit will continue to present a difficultand challenging economic climate for tenants.

Rent Collection 2013/14 2014/15 2015/16 2016/17 Target 2016/17

Target 2017/18

Percentage Rent Collected 98.72% 98.49% 99.44% 100.12% 98.5% 99%

LMH rent collection in 2016/17 was 100.12%. This excellent performance was achieved through awhole organisational focus on maximising income, Rent First. Additionally, the introduction of an arrears trending software system enabled the Income Services team to deliver improvedefficiencies in performance monitoring, managing workflows and individual case management.These critical functions continue to present challenges given the level of poverty and deprivation in the city, coupled with welfare reforms that have led to real reductions in disposable income formany LMH tenants.

In response, LMH maintains a comprehensive and functional approach to income collection that is supported by an effective pre-tenancy 'affordability' assessment process and an outbound callteam. The approach supports LMH’s most vulnerable tenants by providing independent welfarerights advice, alongside an in-house team of Housing Officers dedicated to welfare reform. In2016/17, this approach delivered £3.9m in additional welfare benefits to LMH customers. The costof the Raise Service for 2016/17 was £0.3m.

Affordable Rent

As at 31st March 2017, LMH had a total of 1,351 properties being charged at an Affordable Rent,equivalent to approximately 9% of total stock and made up of conversions and new-build letting.

The additional income from the properties let at Affordable Rent amounted to £700k for 2016/17,exceeding the original £300k target. LMH has reached the 400 conversions stipulated in its original Affordable Homes bid to the DCLG and is now undertaking 400 more conversions in line with thesecond Affordable Homes bid to reach a total of 800 conversions. The aim is to meet this target byyear-end 2018/19.

The average weekly rent on conversion properties is £105.94, compared to an average socialtarget rent of £86.66.


13

Anti-social Behaviour Anti-social Behaviour 2013/14 2014/15 2015/16 2016/17 Target

2016/17 Target 2017/18

Percentage Satisfaction with how an ASB complaint was

handled 62.03% 67.27% 74.35% 56% No target No target

Percentage ASB cases resolved 78.04% 94.83% 97.7% 61% No target No target

There was an increase in the overall number of ASB complaints reported to LMH by its customers to 976 in 2016/17 (2016: 858). All cases were responded to within the LMH service standards, which are 24 hours for Hate Crimes and Domestic Violence cases, and 5 days for other cases. The percentage of resolved ASB cases fell in comparison to 2015/16 and previous years. This variance was attributable to a substantive change in the application of key performance indicator (KPI) methodology that prevents an equitable and accurate comparison to previous year’s performance. Subsequently, due to representations from providers within the sector, this KPI has been deleted, along with comparative data by HouseMark for 2017.

In addition, customer satisfaction with how ASB complaints were managed fell to 56%. Whilst this outcome was very disappointing, it will form the basis of a review of customer satisfaction perceptions of the service provided by LMH, which will inform future service improvements.

LMH recognises that customers place a high priority on an early response to and resolution of ASB complaints. In addition to robust service arrangements, LMH maintains an excellent partnership reputation with local Police and Fire and Rescue Services in helping to tackle instances of ASB.

Response RepairsResponse Repairs Completed

in target Time 2013/14 2014/15 2015/16 2016/17 Target 2016/17

Target 2017/18

Emergency 99.95% 99.95% 100% 100% 100% 100%

Routine (by appointment) 96.68% 98.23% 99.94% 99.98% 99.50% 99.50%

Repairs performance for emergency and routine repairs has remained high and has improved further in 2016/17. This positive outcome is a result of strong and effective partnership working between LMH and HMS.

Decent Homes Standard

Decent Homes compliance of 100% was maintained through 2016/17. The on-going Investment Programme will also ensure that LMH stock continues to exceed the Decent Homes Standard with properties being maintained to the better ‘LMH standard’ agreed with tenants prior to stock transfer.

Gas Compliance

The percentage of properties with a valid Gas Safety Certificate reduced to 99.99% by the end of 2016/17. The slight decline in performance was the result of tenants at two properties failing to allow access despite repeated attempts by HMS. Both properties were at the correct stage of the legal procedure.

Gas Compliance 2013/14 2014/15 2015/16 2016/17 Target 2016/17

Target 2017/18

Percentage properties with a valid Landlord’s Gas Safety Certificate 100% 100% 100% 99.99% 100% 100%


14

Insurance Claims

The number of Property Stock and Combined Liability claims in 2016/17 was 13, consistent with 2015/16 when 13 claims were made. A key element of the LMH risk management strategy is effective control of its operational risk, which is associated with physical loss or damage. LMH hasundertaken a complete risk management review against three key areas of insurable risk. Theseareas included protecting its property through fire risk management, managing its risk againstproperty owner liability by taking proactive measures to prevent slips trips and falls, and employerliability by taking accident prevention measures, improving accident investigation and claimsdefensibility.

The significant improvements in the management of risk and insurance claims handling hasresulted in an overall saving on the cost of Insurance premiums of £77k for 2016/17.

Customer Service Centre Customer Service Centre 2013/14 2014/15 2015/16 2016/17 Target

2016/17Target 2017/18

Percentage of calls resolved at first point of contact 92.76% 91.43% 90.66% 91.27% 92.5% 92.5%

Percentage of calls abandoned 10.01% 8.05% 6.48% 7.98% 5.05% 5.05%

Although 2016/17 saw an improvement on 2015/16 results, performance fell slightly short of thetarget in respect of percentage calls resolved at first point of contact and also missed the target forpercentage of calls abandoned.

However, there was a 2% increase in the number of calls in the year. The service answered 91.27% of calls. Furthermore, the LMH Connect service centre places a high priority on first pointof contact resolutions and participates within a local benchmarking group, consistently out-performs its partners in this regard.

Complaints Complaints 2013/14 2014/15 2015/16 2016/17 Target

2016/17Target 2017/18

Percentage of Stage 1 Complaintsresponded to in time 100.00% 100.00

% 97.08% 100% 100% 100%

Percentage of tenants satisfied with how the complaint was managed 53.80% 58.82% 46.88% 46% No target No target

There was a small increase in the number of stage one complaints from 279 in 2015/16 to 302 in2016/17, with all of the complaints responded to within the service target time.

Customer satisfaction remained consistent with the previous year's results, at 46%. The service was reviewed by LMH's Tenant Scrutiny Panel in 2016/17. A number of recommendations weremade to streamline the approach and focus on putting things right rather than the administration ofthe complaint. As a result a new 'Right in Five', 'Resolve in Ten' customer feedback service was introduced in April 2017 that will support early complaint resolution with the aim of increasing customer satisfaction.


15

Major Works and Cyclical Repairs

Following the completion of the initial five-year Improvement Programme, investment has continued in accordance with the 30-year Property Improvement Plan. In 2016/17, £11.7m was spent on Major Works and Cyclical Repairs, the majority of which focused on improving the physical environment of LMH neighbourhoods and improving the energy efficiency of some of LMH’s hardest to heat homes.

Staff Staff 2013/14 2014/15 2015/16 2016/17 Target

2016/17 Target 2017/18

Average working days lost 8.8 9.87 5.45 8.56 5.0 5.0

Staff turnover 10.86% 11.53% 20.23% 10.1% No target No target

Significant work was undertaken to improve attendance with changes to policies and procedures being implemented in order to manage absence. Despite this absence has increased compared to the previous year. The main contributing factor to this has been a number of long-term serious cases, which are being managed in accordance with the relevant policy. A wider range of occupational health services were implemented towards the end of the year this will have a positive impact on attendance and support a quicker return to the workplace for employees.

Staff turnover at LMH has decreased since the previous year and returned to a more normal level for the sector. The previous year’s high figure was as a result of a number of redundancies following restructure.

Environmental Policy

LMH aims to improve the environmental performance of both LMH’s operations and its housing stock. LMH is continuing to work with SHIFT, an independent benchmarking group endorsed by the Government, to assess and improve environmental performance. LMH maintained its Silver Award in the 2016 assessment, improving performance by 10% against the 2014 assessment.

The Environmental Sustainability Strategy and Action Plan contains clear targets linked to carbon emissions, scarce resource usage and fuel poverty. The action plan has been updated in response to the 2016 SHIFT assessment; successful implementation of the plan would see LMH achieving the Gold Award in 2018.

Grant funding to support energy efficiency upgrades to housing stock has continued to decline. LMH has identified a number of alternative funding methods and technologies to mitigate this. A trial of technology to provide cost effective heating in off-gas properties is underway and further trials to improve the energy efficiency of hard to heat properties have been developed in partnership with manufacturers. A bid for European Funding to support these schemes has been successful at stage one; final confirmation is expected in summer 2017. All proposals have been evaluated based on a range of factors including financial, social and environmental returns.

Equality and Diversity

Gathering and utilising customer profiling data remains a priority for LMH, enabling it to tailor services to meet the needs of individual customers. This forms part of LMH’s People Matter Strategy.


16

LMH holds customer diversity profiling data, which is regularly updated, on significant numbers ofits tenants:

Levels of customer diversity profiling data held - by protected characteristic

2013/14 2014/15 2015/16 2016/17

Ethnicity 92.8% 93% 93.6% 94.5%Disability 88.4% 88.6% 88.3% 88.6%Sex 100.0% 100.0% 100.0% 100%Age 99.0% 99.1% 99.3% 99.4%Sexual orientation 91.4% 91.7% 91.8% 92%Religion or belief 91.8% 92.1% 93.2% 93.8%

Welfare Reform Action

The Government's welfare reform programme continued to present challengers to LMH in 2016/17LMH's response has been to deliver an annually refreshed Welfare Reform Action Plan, which isguided by the following principles:

Understanding the changes;Considering the financial and budgetary implications; Identifying the risk to LMH’s Business Plan;Communicating the changes to LMH customers;Mitigating the impact on LMH customers; and,Adapting operational management arrangements to optimise services and maximise income.

LMH's approach has been to embed a ‘Rent First’ ethos as a whole organisational approach tosupport customers and create a payment culture. LMH frontline services received 'Rent First'awareness training and all teams were tasked with raising customer awareness of the importanceof paying rent as an integral part of their day-to-day duties.

In addition, LMH’s Income Service Team, Outbound Calls Team and Housing (Welfare Reform)Team have been actively supported by:

A contract with RAISE, an independent welfare rights advice service;LMH's Pre-tenancy Team that deals with all new tenants; and,An improving and expanding partnership with Liverpool Credit Union.

Universal Credit continues to incrementally roll out in Liverpool. LMH had 604 Universal Creditcases at the end of the year (2016: 374 cases). The roll out continues to be problematic and casemanagement remains challenging. LMH is working closely with the National Housing Federation,the Local Housing Federation, the Local Housing Authority, DWP and Local Housing Association partners to improve the efficiency of the processes.

LMH’s Digital Hubs, based at each of its office receptions and several Tenant and ResidentAssociation locations, continue to be well supported and enable tenants to make an application forthis first ‘default to digital’ welfare benefit and to satisfy the 'Claimant Commitment' in terms of jobsearch. This has the added benefit of increasing and developing digital skills amongst the tenantbase.

ComMutual, LMH's charitable arm set up in January 2017, concentrates on four themes: MoneyMatters; Go Digital; Health and Wellbeing; and Employment. Going forward, this work is expectedto assist LMH and LMH tenants in meeting the challenges of welfare reform.


17

Return on Assets and Strategic Asset Management

LMH delivers a strategic approach to Asset Management, timed to coincide with LMH’s transition from a Large Scale Voluntary Transfer Housing Association that has delivered its pre-transfer promises into an organisation that has a new agenda for growth.

LMH’s 15,000 homes that transferred from Liverpool City Council in 2008 remain its core assets. Managing and protecting these assets is key to allowing LMH to achieve its ambitions for growth. Good asset management generates increased ‘social dividend’, allowing LMH to invest further in its communities and further its social objectives.

LMH’s strategic approach to asset management is ambitious and sets out the potential over many years to grow its stock base, and transform the housing offer by moving into new tenures, whilst ensuring that the stock inherited at transfer is maintained to its current high standards.

LMH’s key Asset Management objectives are:

� Growing the asset base and creating a more diverse and well balanced portfolio of assets; � Investing to maintain assets at the ‘LMH Standard’ and above the Decent Homes Standard; � Aligning planned, cyclical and responsive investment in core housing assets to create

financial efficiencies and maintain housing standards; � Embedding the IPD (Investment Property Databank) Social Housing Index methodology in

managing the assets and taking investment decisions; and, � Achieving value for money and positive financial outcomes from asset management,

investment planning and procurement to create a ‘social dividend’ for investment in neighbourhoods and services.

LMH is delivering this by:

Investment Planning

Maintaining LMH’s asset standards represents a significant proportion of its cost base and so ensuring value for money in this area is critical to maximising return on assets.

LMH operates a robust approach to investment planning that seeks to:

� Maintain complete and accurate stock condition data; � Plan investment programmes in a way that maximises opportunities for efficiencies; � Achieve outcomes that make a positive contribution to LMH’s Vision; and, � Allow timely and appropriate responses to unforeseen events.

LMHs stock condition data covers all its property holdings, including dwellings, related assets, commercial assets and land. Each asset is surveyed every five years via a rolling programme of stock condition surveys. Data on acquisitions, disposals, completed works and ad hoc surveys is also captured monthly to ensure data accurately reflects the condition of the asset base.


18

Investment plans are carefully designed to minimise the cost of delivering the LMH property and service standards. This is achieved in a number of ways, including:

Aligning programmes that require similar setup costs, such as scaffolding. This reduces both costs and disruption to the tenant;Considering whole life costing and desired outcomes when setting specifications; Ensuring effective procurement; and,Ensuring programmes are based on current stock condition data.

Since 2009, LMH has been using a Property Investment Plan (PIP) methodology for investmentplanning. The PIP is used to translate LMH’s stock condition data and Business Plan resourcesinto meaningful and clear plans of what is to be done on the ground. The PIP is refreshed quarterlyto reflect changes in the underlying stock condition data.

Combined Index

In order to fully understand the holistic performance of the organisation’s assets and optimise thereturn on assets, a robust methodology known as the Combined Index is used. The methodologycomprises:

Granular measurement of financial, social and environmental returns;Proactive reviews of poorly performing assets using a closed loop process; Reactive assessment of assets based on trigger events, such as high cost voids;Assessment of the impact of proposed investment planning decisions; and,Assessment of potential acquisitions.

The Combined Index was developed to enhance the information provided by IPD. It comprises fourstrands:

IPD – past financial performance of assets;Financial Index – future financial performance of assets, such as net Present Value (NPV) and Internal Rate of Return (IRR);Social Index – can and do people thrive in this geographic area; and,Environmental Index – impact of assets on the environment and risk of fuel poverty.

The Combined Index, together with the continuation of LMH’s value for money approach toinvestment planning, enables effective management and protection of existing assets, generatesthe capacity for growth and provides assurance that existing and new assets make a positive contribution to LMH’s vision.

The continuous review of stock data and the PIP allow us to respond to events that have a significant impact on the Business Plan in a timely and appropriate manner.

Option Appraisals

LMH has an embedded option appraisal process to assess the viability of existing and potentialnew assets. The process is comprehensive and rigorous, with outcomes being reported through the relevant governance route to gain approval. The process enables LMH to make informed andtransparent decisions and to provide a consistent approach to decision-making which helpsachieve maximum effectiveness and value for money. Both reactive and proactive option appraisals are undertaken using the data from the Combined Index to provide a holistic view onstock performance.


19

Reactive Asset Reviews Option appraisals are undertaken in response to a range of trigger events including: � High cost voids and repairs; � Potential acquisitions; and, � Hard to let voids.

The option appraisal includes the relevant scheme IPD outputs along with an individual financial appraisal of the asset/proposed asset using Net Present Value (NPV), payback period and impact on the Business Plan. LMH uses the Proval Financial Appraisal model for both Asset Management and Development appraisals and has clear and approved financial assumptions based on the product and/or tenure of the asset. Other factors are also considered in any option appraisal such as contextual data, demand, neighbourhood management considerations, risk factors and legislative/planning issues. Proactive Asset Reviews As part of the annual asset review process, appraisals are carried out to assets that are performing poorly, or are expected to start performing poorly, in one or more strands of the Combined Index. There are currently 7 such reviews underway. Assets that perform well will also be assessed to identify best practice that can be applied to poor performing stock. Reviewing assets before a trigger event occurs allows a full assessment of the asset and the development of short, medium and long term plans to improve performance or manage decline. To date, the option appraisal process has led to informed asset management decisions being taken such as: � Disposal of 17 individual high cost void properties; � Acquisition of 26 properties through LMH’s strategic acquisition programme; � Acquisition of 7 properties through the mortgage rescue scheme; and � Investment in LMH’s 17 sheltered schemes. A full review of the financial performance of LMH stock in terms of NPV has been carried out at a granular level and grouped in line with the schemes categorised for IPD. Net Present Value compares the amount invested today to the present value of future cash receipts, in this case, rent.


20

The above diagram shows the NPV per property over the next 30 years. This data, along with the other Combined Index outputs provide a more rounded view of LMH stock performance which is used to enable informed decision-making going forward in line with the organisation’s AssetManagement Strategy

IT Strategy and Policy

There have been a number of projects delivered in 2016/17 that support LMH’s Corporate Plan. Examples are summarised below:

ISO 27001 – Information Security standard achieved for ICT services; Data warehouse built and development of SQL reporting throughout the core businessareas;Mobile working solution and continued enhancements to Housing teams including TenancyManagement and Income Services enabling staff to take a more effective and cost efficientapproach to the delivery of front lines services to the customer;Developed and launched LMH Group websites for Housing Maintenance Solutions andComMutual; Rollout of SharePoint to all teams that supports collaborative working across the Group;Development and rollout of revised Customer Feedback and Right to Buy workflows; Implementation of Skype for business to support remote working for staff;Migration of telephony from ISDN to VoIP SIP trunks delivered over the Internet to supportthe Value for Money strategy in the delivery of reduced call costs; and,Support the ‘Rent First’ project with the development of a customer centric dashboard which aims to enhance profiling and data collection.

-£100,000

-£75,000

-£50,000

-£25,000

£0

£25,000

£50,000

£75,000

£100,000

Stock Distribution by 30 Year NPV


21

Social Dividend

The Group sees itself as a Social Entrepreneur and expresses its core purpose by the definition of its approach to creating ‘social dividend’. This approach sees the Group carrying out all of its activities in the most efficient and effective manner possible, in a way that makes good business sense and will provide value for money. It maximises outcomes and minimises cost in a similar way to commercial businesses whilst remaining anchored by social purpose and clear values.

ComMutual, LMH's charitable arm set up in January 2017, focuses on four key impact areas: Money Matters; Go Digital; Health and Wellbeing; and Employment. A range of activities are delivered through the Community Investment Team and Toxteth Fire Fit Hub (TFFH) teams.

Key projects that made a positive impact during 2016/17 include:

Community Investment Team

Employment Projects

� Liverpool Mutual in Work– a unique partnership between ComMutual and Liverpool City Council offering LMH customers dedicated training and employment Information, Advice and Guidance (IAG) services, including work clubs, job searching, funding for training, interview skills, apprenticeships and other opportunities geared to getting people into or ready to get into work. During 2016/17: 148 received advice and guidance and 95 found employment, of whom 24 are classified as being in sustained employment as they have worked for more than 6 months.

� Access to Work – an Intermediate Labour Market Programme that creates practical paid work experience placements for young people aged between 16 and 29. Funded through the European Social Fund and a contribution from ComMutual, each placement can last up to 6 months with the goal being to secure employment. During 2016/17, 31 placements were offered.

Financial Inclusion Projects

� Opportunity Loan Fund – in partnership with the Liverpool Central Credit Union ComMutual is providing low-cost loan facilities of up to £1,000 to assist tenants in avoiding high cost loan facilities and/or loan sharks. Liverpool Central Credit Union operates within LMH neighbourhoods and has offices on Park Road, Walton Road and Kensington. An additional outcome is the expectation that this service will encourage people to open bank accounts to enable them to manage their finances more efficiently.

� Help to Pay – provided support for LMH customers to help them reduce the cost of their water bills by ensuring that they were accessing the most appropriate tariffs.

� A Charitable Grants Worker – was initially established in partnership with the CAB whose role it is to apply to a wide range of charitable organisations who specialise in offering financial support to people who are threatened with hardship e.g. grants for white goods, school uniforms etc. In 2016/17, 115 people were provided with charitable grant support to the value of £16,885

� School holiday camps – The school holiday camps in 2016/17 were fully subscribed by young people across LMH neighbourhoods. Camps for 2017/18 are planned and include a fourth camp in Everton.


22

Digital Inclusion Access to the internet for ComMutual customers is vital to ensure they have the best opportunities to access welfare benefits, employment and training, lower cost goods and services and to help their children’s education. The cost to install internet access is prohibitive for many of LMH’s tenants so ComMutual has adopted a number of projects to assist tenants and their families to access services on line: AIMES - a pilot project in partnership with BT and a local internet provider through which

LMH installed free broadband into 50 homes on the Westminster estate in Kirkdale. ComMutual is now looking to extend this project using the lessons learnt from the first 3 years.

Job Clubs – ComMutual established a number of job clubs for tenants to carry out universal

job searching, which is becoming part of their ‘Claimant Co mmitment’. This helped to prevent tenants from being sanctioned and potentially losing their benefits.

IT training hubs – ComMutual carried out IT training at the following locations, across the

city:

o LMH Head Office, The Observatory o LMH North Office, Clubmoor o The Green Residents Association Office, Old Swan o Dalemeadow Residents Association Office, Knotty Ash o Citron Close Residents Association Office, Warbreck o WETRA Residents Association Office, Kirkdale o L6 Community Centre, Everton o Bridge Chapel Community Centre, Allerton o Parkhill Court sheltered housing scheme, Dingle o Macbeth Street Tenants Association

ComMutual is looking to establish further hubs across neighbourhoods and within sheltered schemes as the improvements are completed. Health and Wellbeing ComMutual’s priority to tackle ma jor health issues in partnershi p with the NHS and the Liverpool Clinical Commissioning Group was extended to include a Health Improvement Worker from Liverpool City Council who engaged with LMH customers. In 2016/17, 301 Health and Wellbeing sessions were offered across the city which engaged customers of all ages from primary age children through to older people. ComMutual continues to off er Children’s Health Bursaries to sup port children getting more active and is delivering, in partnership with Liv erpool City Council’s Lifestyles services, children’s swimming lessons. Coupled to these ComMutual offers 3 month adult swimming passes to enable families to swim together.


23

Value for Money (VfM)

VfM Regression Analysis

Delivering better value for money – understanding difference in unit costs

Continuing from the position of June last year when the Homes and Communities Agency (HCA) put forward proposals to regulate the Value for Money (VfM) standards by initiating a uniform set of cost indicators that allow Registered Providers to produce Cost Per Unit (CPU) values against certain cost headings, referred to as “Delivering better value for money – understanding difference in unit costs”, LMH now calculates the relevant CPU.

The methodology adopted by the HCA to conduct cross-sector comparisons is to use Regression Analysis - a statistical tool for estimating the relationships among variables. The analysis looks at a number of cost lines that, when added together, will derive a headline cost for social housing for each provider. The HCA will then compare costs against the sector average (median).

The Regulator recognises that there will be differences in headline costs across the sector and its analysis suggests that half of these variations will be explained by observable factors, such as differences in regional wages, etc. However, the Regulator views that the remaining half of the difference is a result of operating efficiencies.

In an attempt to eliminate the observable differences between Registered Providers (RPs) the HCA has created a number of Indexation Factors that, when applied to the headline cost, smooth out the differences and create a ‘level playing field’. This allows the HCA to compare RPs against one another and against sector averages, thereby highlighting operating efficiencies or inefficiencies.

The indexation (measured) factors are:

� Housing Support for Older people (HFOP); � Supported Housing; � Stock Transfer; � Neighbourhood Deprivation; � Regional Wages; and, � Decent Homes. (not applicable to LMH any more)

This path is now a critical tool in establishing that providers’ Boards understand cost structures, have a comprehensive strategy in place to deliver on-going improvements, and that VfM is an indicator of good Governance. LMH has therefore, incorporated this CPU Analysis into its Value for Money Strategy and Key Contextual Factors going forward.

2014/15 Costs Per Unit (CPU) ‘000 homes for the Sector and LMH are:

Pre-Indexation Headline Cost £k

LMH 3.420 before any indexation adjustment LMH isSector currently in the Lower Middle Quartile,Median 3.550 i.e. costs are lower than the sector average

Lower Quartile 3.190


24

Indexation Adjusted £k

LMH 3.112 after indexation adjustment LMH CPU areSector below the hypothetical baselineHypothetical Baseline 3.300

The table below shows CPU for the year, along with prior year comparisons and future expectations by the measured factors.

LMH Cost per Unit (CPU) by Measured Factors

LMH LMH Global Accounts (LSVT Median)

LMH LMH(Forecast)

2014/15 2015/16 2015/16 2016/17 2017/18

No. of Homes 15,047 15,189 15,334 15,547

Management Charge Value £15,602k £18,531k £15,462k £17,025kCPU £1.037 £1.220 £1.165 £1.008 £1.095

Service Charge Value £2,544k £3,078k £3,487k £3,487kCPU £0.169 £0.203 £0.271 £0.227 £0.224

Maintenance Value £15,741k £13,374k £12,766k £11,858kCPU £1.046 £0.881 £0.961 £0.833 £0.763

Major Repairs Value £17,632k £18,606k £10,649k £10,323kCPU £1.172 £1.225 £0.939 £0.694 £0.664

Total Social Housing Cost

Value £51,519k £53,589k £42,364k £42,693k

CPU £3.424 £3.528 £3.439 £2.763 £2.746

Total Social Housing Cost (Indexed) CPU £3.109 £2.965 £2.382 £2.341

Policy and StrategyThe current Value for Money strategy came into force in May 2016 and will be reviewed in August2018 subject to no major events requiring earlier amendment and adoption.

The strategy has a long-term objective of achieving EBITDA consistent with LMH, as a RegisteredSocial Housing Provider, operating as a ‘lean landlord’, whilst considering the impact of all theentities within the LMH Group.

As mentioned in previous VfM reviews, LMH Group adopts the approach supported by theprinciple of the Value Chain, which encompasses the elements of Economy, Efficiency andEffectiveness. The diagram below illustrates the ‘chain’ and its inter-dependencies.


25

In addition, the strategic themes within the policy are:

� Return on assets; � Absolute and comparative costs of deliverable services; � Cross sector benchmarking; � Feedback and forward view of VfM gains achieved and planned; � Effective procurement; � Efficiency planning and target setting, and � Cost review.

During the 2016/17 financial year the LMH Procurement team outperformed its target of achieving £500k worth of savings by some £158k. Highlights included:

Insurance £77k Better renewal premium achieved by going to market

Vailliant £52k A negotiated rebate against the purchase of domestic boilers

Ogdens 13 £25k Contract negotiations achieve VfM savings

Procurement continues to transition from a Supply Chain functions into a unified strategic and commercial service encompassing all entities within the LMH Group.

Conclusion

During the year, actual revenue costs compared to budget showed a saving of £315k which equates to a CPU reduction of £0.020.

The continuing phasing in of Universal Credit and the furtherance of the 1% rent reduction will demand ongoing and sustained diligence to the principles of VfM to ensure the Group achieves its’EBITDA targets and improve its Social Housing CPU.

Costs (£) Inputs Outputs Outcomes

Efficiency Effectiveness Economy

Qualitative

Quantitative

Value for Money


26

Financial Performance

Year 2013/14 2014/15 2015/16 2016/17Income and Revenue £’000 £’000 £’000 £’000

Rents 60,036 63,009 65,222 65,580Service Charges 1,188 2,544 3,078 3,652Leaseholder Fees 113 115 141 142Right To Buy Income 971 1,317 1,337 1,139GAP Funding 44,501 - - -Other Income 1,456 2,506 2,877 4,240

£ £ £ £Income per property 7,233 4,619 4,783 4.884

Rental income has increased steadily for the last five years due to rent increases up to 2015/16and increased numbers of units since then. Rent has decreased annually in line with theGovernment’s rent restructuring framework in 2016/17 and 2017/18.

Properties no longer move towards target rent on an annual basis due to the Government’srevised policy on rent escalation; LMH currently has 531 homes that will only achieve target rentwhen they become void. All other LMH homes are at target rent except for the 1,351 homes onAffordable Rent.

Investment Property Databank (IPD)

LMH aims to create a ‘social dividend’ through th e efficient and effective management of assetsand delivery of services. LMH is using the International Property Databank (IPD) English SocialHousing benchmark tool to develop its understanding of the performance of the portfolio to enablemore informed decisions and improve the management of LMH assets. The aim of IPD is todemonstrate the economic perf ormance of landlords’ property assets by creating a return-based performance-benchmarking index. This provides detailed information that enables the business toimprove the way it manages its assets and prepare for changes that are forecast in the externalenvironment.

LMH faces increased competition and a more robust regulatory environment for economic factors.There is a need therefore to evidence VfM and improve the quality of decision-making by ensuring it relates to the social and financial return on LMH property investment.

Since it is critical that LMH secures its income and optimises asset value, LMH needs tounderstand how each type of property is performing. IPD provides in-year information on the totalreturn on investment, consisting of the income return, the capital growth and the ‘social dividend’. Ithelps the business decide where it should invest, what it should invest in and what it shoulddispose of. It provides information about the cost of managing individual groups of properties,enabling the business to understand the performance of its assets in the market. IPD also enablesthe business to compare its costs with other organisations in the benchmark group which currentlyconsists of Genesis Housing Association, Spectrum Housing Group, Helena Homes andWythenshawe Community Housing Group. Work is underway to promote IPD across the sectorwith the view of increasing participation, thus enabling more effective benchmarking.

LMH, along with the other participants, has compiled data over a five-year period to gain afinancial understanding of its stock and to benchmark accordingly. Further to the UK SocialHousing benchmark, the introduction of a North West benchmark allows for more meaningful comparison with nearby organisations of similar size. This allows LMH to take a comprehensiveview of its assets to optimise value and take a more strategic approach to asset management.


27

IPD has allowed LMH to identify poor performing properties and understand why high performing assets are doing well. Ultimately the index improves decision making, resulting in LMH being able to better fulfil its social purpose. The high level 2012/13 - 2015/16 results from IPD are provided below against the benchmark. The 2016/17 data is in the process of being compiled with the results expected in September 2017:

IPD Headline Returns 2015/16

The total return on assets combines both the income return and capital growth figures. The portfolio figures represent LMH’s performance and the benchmark shows the combined results of the five housing associations currently taking part in the study. As can be seen in 2015/16 headline returns LMH’s stock overall underperformed the benchmark in terms of total return but this would be expected given the geographical bias of the sample. Along with capital growth, which incorporates the value of the stock on an index basis, these results also take account of income return: the total income and expenditure within the year.

The results breakdown to a scheme level and therefore provide a valuable insight into which schemes are performing well and which are not, thus enabling more informed asset management decisions to be taken at a scheme level in order to improve the return on assets going forward. There are 480 schemes in total, which comprise of individual units grouped by geographical area, property type, number of bedrooms and age. As a result of this grouping, schemes range in size from 1 – 561 units.

*Four participants: LMH, Genesis Housing Association, Helena Homes, Spectrum Housing Group 2012-13 **Five participants: LMH, Genesis Housing Association, Helena Homes, Spectrum Housing Group, Wythenshawe Community Housing Group ***Five participants: LMH, Genesis Housing Association, Helena Homes, Spectrum Housing Group, Wythenshawe Community Housing Group ****Three participants: LMH, Helena Homes, Wythenshawe Community Housing Group

2012-13 Benchma

rk*

2012-13 LMH

Portfolio

2013-14 Benchmark

**

2013-14 LMH

Portfolio

2014-15 Benchmark

***

2014-15 NW

Benchmark****

2014-15 LMH

Portfolio

2015-16 Benchmark

***

2015-16 NW

Benchmark****

2015-16 LMH

Portfolio

Total Return 9.53% 12.81% 8.23% 14.87% 5.64% 6.8% 0.34% 0.50% 6.8% -25.72%

Capital Growth 3.96% 4.91% 1.91% -2.27% -0.20% -0.6% -5.25% -5.83% -0.6% -31.79%

Income Return 5.37% 7.56% 6.22% 17.50% 5.85% 7.5% 5.87% 6.69% 7.8% 8.60%


28

Over the last four years, LMH’s stock performance has fluctuated against the national benchmark due in large to the timing and level of capital investment in the stock. This fluctuation was particularly significant in 2015/16 as a result of the rent cuts introduced by Government.

A reduction in income affects the Income Return in the year the reduction occurs; as such LMH’sIncome Return will not be affected by the cuts until 2016/17. LMH outperformed National andNorth West benchmarks for Income Return.

Capital Growth however is calculated based on Existing Use Value – Social Housing (EUV-SH)valuations and so is affected at the point any rental income reduction is incorporated into these valuations, in LMH’s case the 2015/16 results. Changes to LMH’s approach to capital investmentwill mitigate this reduction in 2016/17, but due to the timing of Board and Funders approvals therevised investment plan was not incorporated in the 2015/16 results.

Income Return, driven by factors under greater LMH control, such as conversion of some voids to affordable rent, planned works, responsive repairs and rent loss outperformed National and NorthWest benchmarks.

LMH has continued to integrate IPD into its asset management decision-making and processesthrough the Combined Index. IPD outputs feed into LMH’s option appraisal process and the datahas been used to assess future property conversions to affordable rent. Scenario modelling using IPD data is now being used to shape the annual investment programme by assessing the impactof proposed investment on the stock performance.

Restated Target 2013/14 2014/15 2015/16 2016/17 2017/18

RETURN ON CAPITAL EMPLOYEDEarnings before interest & tax 16,040 23,339 19,073 27,083 20,826Assets less current liabilities 335,773 352,550 372,807 401,538 381,249

4.8% 6.6% 5.1% 6.7% 5.4%

RETURN ON INCOMENet Income 16,040 23,298 19,073 27,083 20,826Total assets 351,490 376,824 397,267 432,645 432,645

4.6% 6.2% 4.8% 6.2% 4.8%

NUMBER OF PROPERTIESSocial Housing Properties 14,969 15,043 15,191 15,334 15,538

EARNINGS PER PROPERTY 1.06 1.54 1.25 1.77 1.34

New Developments

During 2016/17, LMH completed 299 new homes, with a total investment across the year of£31.2m. The total investment includes a number of schemes or phases of schemes that remain onsite and are due for completion across 2017/18 and 2018/19. There are currently 11 live contracts, with over 350 homes on site.

Key schemes that were completed in 2016/17 include: Marwood Towers; Hazeldale Road; BucklesNursery; Naylorsfield Drive; Hewitson Road; Tetlow Street; Everton Road and the sharedownership units at Harrington Place, Roby.


29

Development Strategy

LMH has a Development Strategy in place, which was agreed by LMH Board in summer 2016.

The Strategy sets out LMH’s objectives:

� To build 350 new homes a year; � To retain affordable rented housing as our core development product; � To increase shared ownership to around 25% of our programme; � To utilise LMH Developments Ltd. and establish LMH Property Co to deliver our first private

rented development; � To place LMH at the heart of devolved government in the Liverpool City Region � Continue to expand provision of Development Agency services; � To partner with Housing Maintenance Solutions (HMS) to build the Group’s capacity for

development; � Further diversity into supported housing, extra care, and rent to buy; � To utilise innovative technologies – taking opportunities to use innovative building

technologies, following on from the trial of modular housing at Naylorsfield Drive; � To build our first homes for outright sale; � To work with Local Authorities to influence the designation of land for residential

development and to access sites; and � To continue to expand the geography of development activity, working with Local Authorities

across Liverpool City Region and neighbouring authorities, to realise residential development opportunities that meet identified needs and support LMH Group’s corporate vision.

During 2016/17, LMH consolidated and grew its development activities to meet the ambitions set out above. Sites are currently being delivered under the Liverpool Housing Partnership umbrella, in association with Liverpool City Council, Redrow Homes and Wilmott Partnership Homes, and a number of developer-lead partnerships have been established.

LMH has secured grant funding totalling £28.7m to deliver 848 new homes under the 2016-21 Affordable Homes programme, which represents the largest allocation within the JV North development framework. This programme will be supplemented with a number of ‘Continuous Market Engagement’ funding bids to the Homes and Communities Agency (HCA) and will contribute to the annual target of delivering 350 new homes for the next 4 years.

2016/17 has also seen the Group develop a number of new initiatives in preparation for delivery of new tenures and work streams. These include:

� LMH Developments – A new group member was formed to help drive a more financially efficient delivery of new homes. LMH entered into a contract with LMH Developments to deliver the majority of live and future development projects. This approach is designed to drive efficiencies, with revenues to be gifted to other parts of the organisation.

� Rent to Buy – LMH has secured funding to deliver 277 new homes using a new type of affordable home ownership product. Rent to Buy allows potential home owners to rent a new home at an affordable rent level for up to 5 years whilst they save for a deposit. The deposit can then be used to apply for a mortgage to buy the property they have rented. Work on the first Rent to Buy homes will begin in 2017/18

� Extra Care – Design work has begun on a new 100-unit Extra-Care development to be delivered in Knowsley. The Westhead Avenue scheme is currently scheduled to begin on site in late 2017/18 and would be the first Extra Care scheme to be delivered by LMH.


30

Sales – The sales programme has increased in 2016/17 with 12 sales completing. A further 80 shared ownership units are on site and due for completion in 2017/18. A sales team structure is under review and will be recruited in 2017/18 to ensure sales progressions can meet the demands of the development programme.

HMS Delivery – The development programme has sought opportunities to work in partnership with HMS on new-build contracts to be delivered on behalf of LMH. The first of these projects is currently on site. Ogden’s Phase 3 (13 new-build Shared Ownership homes) and the Ogden’s Clock Tower (refurbishment of the listed building to comprise 19 Affordable Rent apartments) are due for completion in 2017/18 and early 2018/19.

New Assumptions – The assumptions used to appraise new opportunities has been under review to ensure they are current. These assumptions were approved by Board in June 2017 and will be used to assess future opportunities in 2017/18.

New Geographies – The new business team is reviewing opportunities to develop new homes across the Liverpool City Region. It is expected that there will be a focus on specific areas, including East Cheshire, Sefton and West Lancashire. Detail of a strategy covering focus areas of development will be put to the Board for approval in 2017/18. These new areas of work may also provide different delivery models.

At the financial year end, the LMH Development Programme has delivered 674 new homes. Expenditure in 2016/17 reached £31.2m, with £6.5m grant income received. The Programme for 2017/18 is forecast to increase to £52m, with expected grants of £11.5m as the rate of completion of new homes accelerates to over 300 per year.


31

Financial Review

For 2016/17, rents were set in accordance with the Homes and Communities Agency (HCA) Rent Restructuring framework. The repairs and maintenance costs, and overheads were in line with expectations. There was a significant level of planned expenditure incurred on the Improvement Programme and in line with expectations a surplus in 2016/17 was posted on the Income and Expenditure account.

LMH’s financial performance in 2016/17 has satisfied lenders’ covenants with respect to Asset Cover and Annual Cash Flow Deficit.

The Group’s Statement of Comprehensive Income and Statement of Financial Position are summarised below, followed by a summary of the key features of the Association’s financial position as at 31st March 2017.

Group

2017 Restated

2016 Statement of Comprehensive Income (£’000) (£’000)Total turnover 76,024 72,655 Operating costs (46,893) (52,327) Surplus on sale of fixed assets 1,139 1,326 Financing costs (5,366) (5,619)

Surplus for Financial Year(before tax) 24,904 16,035

2017 2016 Statement of Financial Position (£’000) (£’000)Housing properties, net of depreciation 360,830 327,989 Housing properties under construction 15,320 22,924 Other fixed assets 2,988 3,396

Fixed assets net of depreciation 379,138 354,309 Net current assets 26,907 20,136

Total assets less current liabilities 406,045 374,445

Creditors: amounts falling due after more than one year 125,633 119,203

Provision for liabilities 618 485 Pensions liability 8,664 6,583

Total net assets 271,139 248,174

Revenue reserve 269,218 248,174

Restricted reserve 1,911 -

Total reserves 271,129 248,174


32

2017 2016Properties (as at 31 March) No. No.

Social Housing Properties 15,334 15,189Social Housing Properties leased from Liverpool CityCouncil

37 37

Non-Social Housing Properties 7 7

Total Properties 15,378 15,233

Accounting Policies

The Group’s principal accounting po licies are set out on pages 51-59 of the financial statements.The policies that are most critical to these financial statements relate to accounting for Housing Properties, inclusive of the cost of properties, capitalisation of improvement works anddepreciation.


33

Housing Properties

At 31st March 2017, LMH owned 15,334 housing properties (2016: 15,189), 7 retail units (2016: 7) and 3 multi-occupancy houses (2016: 0).

Improvement works totalling £47.9m were carried out in 2016/17 to support the wider aims of LMH’s Corporate Plan. A summary of the works undertaken is provided below:

Programme 2016/17 Completed Units

2016/17 Expenditure

(£000) Kitchens 67 325 Bathrooms 74 249 Central Heating – Boilers 104 173 Central Heating – Carcass 38 97 Wiring 60 133 Doors 44 50 Communal Works 700 Structural Works 3,753 Hostel Works 2 Asbestos – Safety Works - Adaptations 95 Environmental Works 3,861 Development Programme (completed) 35,105 Other Works and Fees 3,328 Total 47,871

Pension Costs

LMH has admitted body status to the Local Government Pension Scheme and contributes via the Merseyside Pension Fund, (MPF) and the Cheshire Pension Fund (CPF). The Group also provides a Group Pension Scheme supplied by AVIVA.

LMH’s contributions for 2016/17 with respect to pensionable pay were as follows:

� MPF: 18.3% � CPF: 22.8% � LMH Group Pension Scheme: 6%

MPF reviews employer contributions every three years via an actuarial valuation. The next actuarial valuation will review LMH’s contribution from 2019/20.

CPF reviews employer contributions every three years via an actuarial valuation. The next actuarial valuation will review LMH’s contribution from 2017/18.


34

Capital Structure and Treasury Policy

The Group’s treasury operations are governed by its treasury management policy, strategy and procedures, all of which have been approved by its Board.

The Group regards the successful indication, monitoring and control of risk to be the prime criteriaby which the effectiveness of its treasury management activities will be measured.

Accordingly, the analysis and reporting of treasury management activities will focus on their risk implications for the Group.

The Group’s Treasury Management Strategy states that to assist in controlling interest rate risk,60% to 80% of loans should be drawn on a fixed rate basis. There may be occasions during theyear, when this ratio is not met due to the interest rate environment. However, these occasionsshould be treated as only short-term with the 60% to 80% fixed rate range being regarded as thestandard.

As at 31st March 2017, the Group had borrowed £120m, comprising of a £110m fixed rate loan and£10m variable rate loan. Thus, as at 31st March 2017, the level of fixed rate borrowing at 92%was above the Strategy’s stated 80% maximum. This higher than planned level of fixed rate debthas resulted from the hedging strategy implemented at stock transfer in 2008 together with thefinancial outperformance of LMH against its Business plan since that time.

In 2016/17 LMH began a re-financing exercise to ensure the Group has adequate financing inplace to support its medium and long term strategic growth objectives and development of newhomes.

The Group borrows and lends only in Sterling and so is not exposed to currency risk.

Cash Flows

The Cash Flow statement on page 50 of the financial statements identifies an increase in cashheld (after financing) during 2016/17 of £3.9m.

The key elements with respect to this increase in cash balance are analysed below.

2016/17 2015/16 Note

Net cash inflow fromoperating activities

41,610 38,726 See Note 29

Cash flow frominvesting activities

(32,401) (46,711) Capitalised expenditure onHousing Properties and OtherFixed Assets, offset by right tobuy receipts, (the latter being netof the share due to Liverpool cityCouncil).

Cash flow fromfinancing activities

(5,310) (5,581) Interest paid on loans net ofinterest received on cash surplus.

Loans - - Accessed via agreed facilityagreement with lenders.

Increase / (decrease) incash balance

3,899 (13,566)


35

Liquidity

During 2016/17, the Group satisfied its loan covenants with lenders, including the principal financial covenants relating to the “Annual Cash Flow Deficit” and “Asset Cover”. As at 31 March 2017, the Group had an un-drawn loan facility with its lenders of £35m. The Group’s cash balance as at 31 March 2017 of £40.9m was held on termed deposits on a maximum of 6 months.

Lenders have approved the Group’s 2017/18 Business Plan. The approval gives access to sufficient lending facilities to meet the forecast borrowing included within the Business Plan. The Board has approved an addendum to the Loan Facility Agreement. Please refer to note 35 for more information.

Going Concern

The Group’s business activities, its current financial position and factors likely to affect its future development are set out within this Strategic Report. The Group has in place long-term debt facilities (including £35m of undrawn facilities at 31st March 2017), which provide adequate resources to finance committed property refurbishment and improvement programmes, along with the Group’s day-to-day operations.

The Group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders’ covenants. In 2016/17 LMH has embarked on a re-financing exercise to support its strategic growth aspirations in the medium and long term. The objectives of the re-financing are to re-structure the current loan portfolio with existing lenders and secure further financing of £50m in the near future to support the development of new homes.

After making enquiries, the Board has a reasonable expectation that the Group has adequate resources to continue in operation existence for the foreseeable future, being a period of not less than 12 months after the date on which the report and financial statements are signed. For this reason, it continues to adopt the going concern basis in the financial statements. In this context reference should be made to the Operating and Financial Review.

Statement of Compliance

In preparing this Strategic Report and Board report, the Board has followed the principles set out in the Statement of Recommended Practice (SORP): Accounting for registered social housing providers 2014.

Paul Burns Chair Date: 27 July 2017


36

Report of the Board

The Board presents its report and audited financial statements for the year ended 31 March 2017.

Principal Activities

The Group’s principal activities are the development, maintenance and management of affordablehousing.

Charitable Status

LMH became an exempt charity on transfer from Liverpool City Council, the Co-operative and Community Benefit Society registration number is 29998R.

Post Balance Sheet Events

In July 2017 LMH Group re-structured its existing syndicate loan portfolio, retaining the existing finance, switching to a bi-lateral loan arrangement. This has enabled the Group to release securityfor further lending via the bond market in the short term. We consider the impact of the re-financing will have a positive effect on the Group’s long-term financial viability and does not have any significant effect on the Group’s financial position.

Board Members and Executive Directors

An independent Governance Review was carried out in 2016/17 which made recommendations toamend the composition of the LMH Board to provide for a smaller, more flexible, Board comprising of a total of up to 12 members appointed on the basis of competence rather than constituency.

Whilst revisions to the LMH Rules allow for up to 12 members of the Board, an optimum number ofnine was established which includes eight Non-Executive members meeting the specific needs ofLMH in terms of skills and expertise together with one Executive member being the ChiefExecutive. There is also scope for two co-optees on the Board.

Other changes implemented as part of the Governance Review include:

Updating LMH Rules;Reviewing and updating LMH’s suite of key governance documents; and,Adopting a new skills matrix for the Group Board, which reflects the changing needs of thebusiness.

Insurance policies indemnify Board members and officers against liability when acting for theGroup.

Board training and development is ongoing and delivered in various ways including in-housetraining, external training, attendance at conferences and seminars, Board away days and electronic briefings. Board training delivered in 2016/2017 included:

Risk Management

Risk Appetite: Exploring; Understanding; Stating.

Board Strategic Assurance – Meeting the Requirements of the Regulatory Framework

Performance Management


37

� Delivering better Value for Money: Understanding differences in Unit Costs

� The Role of the Regulator and IDA

The Executive Directors, where applicable, are members of the Local Government Pension Scheme, a defined benefit career average pension scheme. They participate in the scheme on the same terms as all eligible staff.

The Executive Directors are entitled to other benefits such as the provision of a car allowance payment. A summary of salary, benefits and Board member expenses is provided in Note 10 of the financial statements.

Governance improvements / changes last year and planned for 2017/18

LMH was assessed as having a G1 and V1 rating at its last review by the Social Housing regulator. In order to maintain the G1 and V1 rating, planned activities for 2017/18 include:

� Continue to review key governance documents including Financial Regulations, Standing Orders and Scheme of Delegation to ensure they are fit for purpose and reflect any changes that have been made to the governance structure

� To ensure that the LMH Group submits all regulatory returns in a timely manner

� To carry out an annual assessment against the Code of Governance detailing any areas of noncompliance and any actions required by LMH to become fully compliant

� To carry out an annual assessment of Compliance Against the Social Housing Regulator’s Standards and any actions required by LMH to become fully compliant

� To carry out an annual assessment against the Mergers, Group Structures and Partnerships: NHF Voluntary Code and Existing Opportunities

� To establish and deliver a Board training and development plan using information from a skills audit carried out with individual Board members

� To carry out a full Board appraisal to ensure Board members have the correct skills and to identify any areas for development

� To carry out appraisals of LMH committees to ensure they are fit for purpose and committee members are trained appropriately

� To engage with LMH shareholders on a regular basis through shareholder meeting with the Chief Executive and senior staff.


38

Customer Involvement

LMH’s Tenant Scrutiny Panel (TSP) is well established and has been reviewing LMH servicessince 2011. The TSP is formally constituted as part of LMH’s Governance arrangements and has formally constituted powers linking it to the Board and Committee structure.

The TSP carried out a review of customer involvement in 2016/17, making a number ofrecommendations that LMH will be implementing through 2017/18. These include theimplementation of a new framework for customer involvement, which contains a menu ofinvolvement options to ensure customers have different opportunities to engage with LMH at a level which is appropriate and comfortable to them. LMH will continue to support and strengthenthese options and also proposes the establishment of a tenants’ panel that will be made up ofrepresentation from all LMH groups following full consultation with customers and tenants andresident associations.

Employment

The success of the Group is dependent on the staff who deliver the services to customers andwork in partnership with other partners. LMH recognises the importance of employee involvementfor the company's on-going success. Various forums and mechanisms to inform, consult andinvolve employees including a Recognition Agreement with recognised Trade Unions are in place. A Staff Forum also meets to ensure a non-trade union members have a voice and are ableproactively to contribute to the business.

LMH is committed to achieving equality and diversity within the workplace and has policies in placeto ensure equality of opportunity for individuals with regard to recruitment, employment andlearning and development activities. LMH is aware of its responsibilities in respect of equality and diversity. A staff group named “Your Voice” provides a forum for all underrepresented groups tomeet and discuss issues, new ideas and review polices before any changes are submitted forformal consideration.

11.5% of the LMH workforce classify themselves as disabled. LMH seeks to ensure that any reasonable adjustments or adaptations are in place to support people in their role and these arereviewed on an annual basis. LMH is currently pursuing Disability Confident accreditation, which will replace the “Two Ticks” scheme and the guaranteed interview scheme.

A ’Wellbeing Group’ has been set up to lead on new initiatives in order to promote employeephysical and mental wellbeing. A programme of events has been organised such as cholesterolassessments, blood pressure checks, introduction to yoga and massages to relieve tension. Theorganisation provides free fruit to staff in order to encourage healthy eating.

LMH was recently reassessed for the Investors in People Wellbeing Standard and will bereassessed for the Workplace Wellbeing Charter in the next few months. This year LMH wasnominated for an award with Merseyside Sports Partnership for the work it has done with employees to improve wellbeing.

The health, safety and welfare of LMH employees and customers are paramount in all the activities and services that are carried out. LMH ensures that employees are trained and are aware of their responsibilities as LMH representatives. Any accidents or near misses are reportedto the Health and Safety Manager and are thoroughly investigated and any appropriate remedialaction is taken.


39

The Group Audit and Risk Committee oversees all health, safety and wellbeing issues relating to staff and the organisation. There is a Health and Safety Committee that meets on a quarterly basis and is chaired by the Executive Director (Resources). A report is submitted by the People Service Director to quarterly Group Audit and Risk Committee meetings.

LMH has a strong people focus and prides itself on having an enthusiastic and dedicated workforce. Management development, managing change and customer excellence are viewed as key skills for staff in delivering customer service excellence. LMH supports staff with both role related and personal development via a variety of methods including studying for professional qualifications, in house accredited learning, e-learning and more recently encouraging social learning with employees supporting their peers informally.

A full-time dedicated Learning Partner has been recruited to enable LMH to deliver internal accredited courses and more ‘in house’ training. It is envisaged that this will help reduce cost and be more effective for staff. The organisation was successfully re-assessed for the Investors in People Gold Award in March 2017 and was proud to retain the award and improve on the score of the previous assessment.

Donations

The Group made £427 of donations to charitable organisations during the year (2016: £665) and no political donations. HMS will gift aid an amount equal to its taxable surplus for the current financial year.

Internal Controls

LMH has a robust risk management approach in place. A risk register clearly identifies risk owners and mitigating actions put in place to manage corporate and operational risks. These are reported to the Board and Committees on a regular basis and challenged accordingly. The Board acknowledges its overall responsibility for establishing and maintaining the whole system of internal control, inclusive of the management of risk and for reviewing its effectiveness.

Whilst the Board cannot delegate ultimate responsibility for the system of internal control, it can and has, delegated authority to the Group Audit and Risk Committee to regularly review the effectiveness of the system of internal control. The Committee meets on a quarterly basis and the minutes of each meeting are reported to the Board.

The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and to provide reasonable, but not absolute, assurance against material misstatement or loss.

The annual review of the effectiveness of the system on internal control was reported to the Group Audit and Risk Committee on 5th May 2017. The annual report of the internal auditor, TIAA, was also reported to the Group Audit and Risk Committee on 27th April 2017.


40

The key elements of the control framework are identified below:

Source ofInternalControl

Key Element

Governance and Management Structures

Operation of governing Board with annual election process for tenantmembership. Operation of a separate Group Audit and Risk Committee.2015 - 2020 Corporate Plan approved by the Board.Organisational rules, policies, procedures, Corporate and OperationalPlans in place.Standing Orders, Financial Regulations and Scheme of Delegationsapproved and operating, providing accountability and decision-making structure. Clear lines of accountability of staff, responsible for the delivery of theCorporate Plan and Operational Plans.Tenant Scrutiny Panel (TSP) in place, to independently challenge theorganisation to improve services to customers.

Performance Reporting

Performance Management framework operating with regular reporting tothe Board and Group Executive team.Responsibility for key performance indicators allocated to lead officers.Annual performance review of all staff undertaken by managers tosupport delivery of Corporate and Operation Plans.

Risk Management

Risk Management framework operating with regular reporting to theGroup Audit and Risk Committee. Insurance provision, providing cover,inclusive of housing properties and public liability.

Internal Audit

2016/17 internal audit programme delivered by TIAA and reported, along with their annual report to the Group Audit and Risk Committee.TIAA Annual Report stated there was reasonable assurance regarding the effective and efficient achievement of LMH’s objectives.

External AuditGrant Thornton UK LLP are appointed as the Group’s external auditors.Grant Thornton UK LLP report on the Group financial statements andissue a management letter to the Group Audit and Risk Committee.

Financial Reporting and

Control

Procedures, including Financial Regulations and Treasury ManagementPractices which have been approved by the Board and are in operation.Annual Business Plan to support the delivery of the Corporate Planapproved by the Board and lenders.Annual Budget approved by the Board. Regular financial performance reports (including loan covenantcompliance to the Board and Leadership team).

Regulatory

Regulatory financial returns submitted to HCA allowing them to analyseand report on LMH’s financial viability including the Financial ForecastReturn, Annual Account Return and Quarterly Financial Risk Surveys focusing on key areas of financial and economic risk. Adoption of the National Housing Federation’s Code of Governance:Promoting Board Excellence which is reviewed via an annual self-assessment.Adoption of the National Housing Federation’s Code on Mergers, GroupStructures and Partnerships.Regulatory compliance evidence via self-assessment against the HCAstandards.


41

Source of Internal Control

Key Element

Anti-fraud Measures

� Anti-Fraud and “Whistle Blowing” strategies approved by the Board. � Fidelity Guarantee insurance in place.


42

Key Risks to the Group Key Risk Status Planned Development in Internal

Controls

Rental Income received lessthan planned

2016/17 rent collection performance 100.12% againsta target of 98.5%All associations anticipatingsignificant increase in rent arrears as a result of welfarereforms and the roll out ofUniversal Credit and direct payments to tenants whichstarted in September 2014 in Liverpool.

Specialist Welfare Reform Team has been set up.Monthly performance reporting onarrears cases directly linked to spareroom subsidy and Universal CreditClose liaison with City Council’s Housing Benefit Service in particularidentification of those affected by the spare room HB reduction. Revising Allocations Policy to counterreductions in Benefit.Work is being carried out to predictrent collection taking intoconsideration the impact of furtherplanned Welfare Reform reviews

Failure to effectivelymonitor,anticipate andrespond to changes in the externalenvironment and maintainfinancial viability

LMH retained V1 status with the HCA for FinancialViability.

G1 status for Governance

FFR business plansubmission has beenapproved by the HCA

The Group regularly undertakesscenario analysis to inform itsstrategic and financial planningprocesses.Risks emerging as a result of externalchanges are regularly reviewed and reported to the Board. LMH has membership of relevant trade bodies and staff attend meetings and briefings to keep upwith the latest developments in thesector.

Failure to maintain future development programmecapacity.

LMH has an agreed plan todevelop circa 1,500 new units over the next few years starting 2013/14, the fundingin place.

Assets team experienced in development Controls in place regarding fundingEnhanced IT reporting

Failure to deliverthe planned development programme,achievingcompliance with relevantstandards,within agreed resources.

Funding has been secured for the next phase ofdevelopments. The Board has approved an Annual DevelopmentProgramme

Progress against targets is monitored and reported at appropriate levels and frequencies.

For a full list of risks refer to the risk register.


43

Internal Controls Assurance

As part of the Group’s governance structure, LMH has a Group Audit and Risk Committee which meets on a quarterly basis. The minutes of each meeting are included in the Board minutes for scrutiny.

Key responsibilities are:

� Maintenance of a robust and appropriate culture of control and risk management throughout LMH and HMS;

� The external audit and annual external financial reporting process and its effectiveness;

� The framework and processes for risk assessment, quantification and management within LMH and HMS, making recommendations for change as necessary or appropriate;

� The accounting and internal control systems of LMH and HMS (monitor, management and review);

� The internal audit function (appointment, management and review);

� Ensuring effective co-ordination between internal and external audit;

� The budget needed to resource effective external and internal audit and other responsibilities of the Committee;

� The effectiveness of, and value added by, the Committee and contribute to an assessment of the effectiveness of the governance of LMH;

� Disaster recovery planning (management and review);

� The approval of the Internal Controls Assurance Statement; and

� The suitability of insurance arrangements including a review at least once a year.

A risk management policy is in place and reviewed annually. LMH’s Risk Register is reported quarterly to the Group Audit and Risk Committee and provides a summary of LMH’s Risk Register, identifying those areas assessed as being a strategic risk and any action to mitigate the risk.

LMH has an anti-fraud policy. The aims and objectives of the policy are to prevent, deter and detect fraud, corruption and other irregularity and its intentions where it is suspected and/or committed. In addition, the policy aims to clearly communicate the Group’s stance on fraud both internally and externally and to strengthen the Group’s anti-fraud culture.

The Board and Executive Management Team are committed to the highest ethical standards and require all the organisation’s strategic partners and stakeholders, including those of contractors to make themselves aware of and comply with the seven principles of public life as defined in the Nolan Report (‘First Report of the Committee on Standards in Public Life’, Committee on Standards in Public Life. 1995).

LMH regularly reviews its data protection policy and performance against the policy is managed through the training of staff on a regular basis. Both LMH and HMS are registered as data users with the Information Commissioner’s Office. Organisational risk actions are managed through LMH's performance management tool Covalent.


44

LMH operates in a challenging economic environment, and as part of its risk and assuranceprogramme keeps up to date with work on accounting, risk and regulation, financial management,private finance and taxation. The Group’s financial regulations are reviewed and updated on anannual basis and this review covers all aspects of financial control, process and procedures,setting out the Board and Executive Management Team expectations. Financial control includes afinancial plan and annual budget. Performance is measured regularly throughout the year,providing feedback to all levels of the company. Areas included in the policy are investment andfinancial business modelling, financial management, treasury and the raising and use of privatefinance, taxation, accounting, assurance and the regulatory control. The policy aims to incorporatea platform to support its value for money strategy. The document is issued to all staff annually, and is subject to regular training programmes for new and existing staff.

On an annual basis the Group’s Audit and Risk Committee sets out a rolling programme of internalaudits of key business services and processes. The criteria used takes into account businessrisks, changes in operational environment, previous audit conclusions, current business risk (based on risk management policy) and management assessment and performance data. Theprogramme is monitored by the Committee on a quarterly basis and any feedback or actions aremanaged by the Group’s Risk management steering group and Business Support team

Annual General Meeting

LMH’s Annual General Meeting (AGM) will take place on 20th September 2017.

External Auditors

A resolution to re-appoint Grant Thornton UK LLP will be proposed at the forthcoming AGM.

Statement of the Responsibilities of the Board for the Report and Financial Statements

The Board is responsible for preparing the report and financial statements in accordance withapplicable law and regulations.

Co-operative and Community Benefit Society legislation requires the Board to prepare financial statements for each financial year. Under that law the Directors have elected to prepare thefinancial statements in accordance with United Kingdom Generally Accepted Accounting Practice(United Kingdom Accounting Standards and applicable laws) including FRS102 The FinancialReporting Standard applicable in the UK and the Republic of Ireland. Under the Co-operative and Community Benefit Society legislation the directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state of affairs and surplus ordeficit of the Association and Group for that period. In preparing these financial statements, theDirectors are required to:

Select suitable accounting policies and then apply them consistently; Make judgements and accounting estimates that are reasonable and prudent;State whether applicable UK Accounting Standards and the Statement of RecommendedPractice: Accounting by Registered Housing Providers (2014), have been followed, subjectto any material departures disclosed and explained in the financial statements; andPrepare the financial statements on the going concern basis unless it is inappropriate topresume that the Association will continue in business.


45

The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and Association and enable it to ensure that the financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2015. It is also responsible for safeguarding the assets of the Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board is responsible for the maintenance and integrity of the corporate financial information on the Association’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The members of the Board confirm that, in so far as each member of the Board is aware, there is no relevant audit information of which the Association’s auditor is unaware; and the members of the Board have taken steps that they ought to have taken as member of the Board in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Regulatory Compliance

Governance Compliance Statement

LMH fully complies with the Regulatory Framework (Economic and Consumer Standards). As part of its compliance with the Governance and Financial Viability Standard, LMH has adopted the NHF 2015 Code of Governance. LMH demonstrates compliance with all elements of the Code and self-assesses against the Code on an annual basis.

In addition LMH has adopted and complies with the NHF Merger Code which supports the Code of Governance to ensure that LMH operates effectively, efficiently and economically.

Approval The report of the Board was approved by the Board on 27th July 2017 and signed on its behalf by:

Paul Burns ChairmanDate: 27 July 2017


46

Independent auditor's report to the members of Liverpool Mutual Homes Limited

We have audited the financial statements of Liverpool Mutual Homes Limited for the year ended31 March 2017 which comprise of the Association and Consolidated Statements ofComprehensive Income, the Association and Consolidated Statements of Financial Position, theGroup and Association Statements of changes in Reserves, the Consolidated Statement of Cash flows and the related notes. The financial reporting framework that has been applied in theirpreparation is applicable law and United Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice) including FRS 102 The Financial Reporting Standardapplicable in the UK and Republic of Ireland.

This report is made solely to the society's members, as a body, in accordance with regulationsmade under Sections 87 and 98(7) of the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the society's members those matters we are required to state to them in an auditor's report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility to anyone other than thesociety and the society's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the board and the auditorAs explained more fully in the Statement of Board's Responsibilities set out on pages 44 and 45,the board is responsible for the preparation of financial statements, which give a true and fair view.Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the FinancialReporting Council's website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements In our opinion the financial statements:

give a true and fair view of the state of the group and parent society's affairs as at 31 March 2017 and of the group and parent's income and expenditure for the year then ended;have been properly prepared in accordance with the Co-operative and Community BenefitSocieties Act 2014, the Housing and Regeneration Act 2008, and the Accounting Directionfor Private Registered Providers of Social Housing 2015.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Co-operative andCommunity Benefit Societies Act 2014 requires us to report to you if, in our opinion:

a satisfactory system of control over transactions has not been maintained; orthe parent society has not kept proper accounting records;the financial statements are not in agreement with the books of account; orwe have not received all the information and explanations we need for our audit.

Grant Thornton UK LLPStatutory Auditor, Chartered AccountantsManchester Date:


47

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2017

Restated Note 2017 2016

£’000 £’000

Turnover 3 76,024 72,655

Operating costs 3 (46,893) (49,056)

Impairment loss - (3,271)

Operating surplus 5 29,131 20,328

Gain on disposal of fixed assets (non-operational) 6 1,139 1,326

Interest receivable and other income 7 167 223

Interest payable and similar charges 8 (5,310) (5,581)

Other finance charges 25 (223) (261)

Surplus on ordinary activities before taxation 24,904 16,035

Tax on surplus on ordinary activities 11 (192) (31)

Surplus for the year 24,712 16,004

Actuarial gain /(loss) in respect of pension schemes 25 (1,783) 2,192

Total comprehensive income for the year 22,929 18,196

The accompanying notes form part of the financial statements.

The financial statements were approved by the Board on 27 July 2017 and signed on its behalf by:

Paul Burns Ray Jones Peter Fieldsend Chair Board Member Secretary


48

Association Statement of Comprehensive Income


RestatedNote 2017 2016

£’000 £’000

Turnover 3 74,732 72,864

Operating costs 3 (48,565) (51,585)

Impairment loss - (3,271)

Operating surplus 5 26,167 18,008

Gain on disposal of fixed assets (non-operational) 6 1,139 1,326

Interest receivable and other income 7 164 219

Interest payable and similar charges 8 (7,543) (5,581)

Other finance charges 25 (223) (261)

Surplus on ordinary activities before taxation 19,704 13,711

Tax on surplus on ordinary activities 11 (5) -

Surplus for the year 19,699 13,711

Actuarial gain /(loss) in respect of pension schemes 25 (1,783) 2,192

Total comprehensive income for the year 17,916 15,903

The accompanying notes form part of the financial statements.


Paul Burns Ray Jones Peter FieldsendChair Board Member Secretary


49

Consolidated Statement of Changes in Reserves


Group

Restricted reserve

Restated Revenue

reserve

Restated Total

£’000 £’000 £’000

Balance as at 1 April 2015 - 229,978 229,978 Total comprehensive income for the year - 18,196 18,196 Balance as at 31 March 2016 - 248,174 248,174

Total comprehensive income for the year 1,885 21,044 22,929 Reserves at acquisition 26 - 26 Balance as at 31 March 2017 1,911 269,218 271,129

Association Restated Revenue

reserve

Restated Total

£’000 £’000

Balance as at 1 April 2015 228,498 228,498 Total comprehensive income for the year 15,903 15,903 Gift Aid received in the year 2,238 2,238 Balance as at 31 March 2016 246,639 246,639

Total comprehensive income for the year 17,916 17,916 Gift Aid received in the year 2,407 2,407 Balance as at 31 March 2017 266,962 266,962


50

Consolidated Statement of Financial Position

At 31 March 2017

Note 2017Restated

2016£’000 £’000

Housing properties 12 376,150 350,913Other tangible fixed assets 13 2,063 2,471 Investment properties 14 925 925

379,138 354,309

Current assetsProperties held for sale 16 2,335 779Stock & WIP 17 2,781 92Debtors 18 7,433 7,631 Cash at bank and in hand 40,954 37,055

53,503 45,557 Creditors: Amounts falling duewithin one year 19 (26,596) (25,421)

Net current assets 26,907 20,136


Creditors: Amounts falling due after morethan one year

20 125,633 119,203

Provisions for liabilities 26 618 485Net pension liability 25 8,664 6,583


Capital and reserves Non-equity share capital 28 - -Revenue reserve 269,218 248,174 Restricted reserve 1,911 -


The accompanying notes from part of these financial statements.


Paul Burns Ray Jones Peter FieldsendChair Board Member Secretary


51

Association Statement of Financial Position

Note 2017 Restated

2016 £’000 £’000

Housing properties 12 376,150 350,913 Other tangible fixed assets 13 2,092 2,421 Investment Property 14 925 925 Investment in Subsidiaries 15 3,050 2,800

382,217 357,059

Current assets Properties held for sale 16 2,334 779 Stock & WIP 17 2,424 13 Debtors 18 7,054 4,989 Cash at bank and in hand 38,615 34,427

50,427 40,208 Creditors: Amounts falling due within one year 19 (31,106) (24,460)

Net current assets 19,321 15,748


Creditors: Amounts falling due after more than one year

20 125,633 119,203

Provisions for liabilities 26 279 382 Net pension liability 25 8,664 6,583


Capital and reserves Non-equity share capital 28 - - Revenue reserve 266,962 246,639


The accompanying notes from part of these financial statements.


Paul Burns Ray Jones Peter Fieldsend Chair Board Member Secretary


52

Consolidated Cash Flow Statement


Note 2017 2016£’000 £’000

Net cash inflow from operating activities 29 41,610 38,726

Cash flow from investing activities Purchase of tangible fixed assets (367) (650)Purchase and construction of housing properties (44,393) (54,476)Proceeds from sale of tangible fixed assets 5,713 2,685Grants received 6,479 5,507Interest received 167 223

(32,401) (46,711)Cash flow from financing activities Interest paid (5,310) (5,581)

(5,310) (5,581)

Net change in cash or cash equivalents 3,899 (13,566)Cash and cash equivalents at beginning of year 37,055 50,621

Cash and cash equivalents at end of year

40,954 37,055

The accompanying notes form part of these financial statements.


53

Notes to the Financial Statements

1. Legal status The Association is registered under the Co-operative and Community Benefit Societies Act 2014 and is a registered housing provider.

The Group has three subsidiaries; Housing Maintenance Solutions Ltd is registered under the Companies Act and undertakes construction, repairs and maintenance operations for LMH and third party clients. LMH Developments Ltd is registered under the Companies Act and develops new housing for the Group. ComMutual is a registered charity providing support to communities across the Liverpool region and LMH tenants.

Registered Office: The Observatory 1 Old Haymarket Liverpool, L1 6RA

2. Account policies

Basis of Accounting The financial statements of the Group and Association are prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) including Financial Reporting Standard 102 (FRS102) and the Housing SORP 2014: Statement of Recommended Practice for Registered Social Housing Providers and comply with the Accounting Direction for Private Registered Providers of Social Housing 2015.

LMH is a public benefit entity in accordance with FRS 102.

The financial statements are prepared in Sterling (£)

Disclosure exemptions The individual accounts of LMH have adopted the following disclosure exemptions: � financial instrument disclosures, including:

o categories of financial instruments, o items of income, expenses, gains or losses relating to financial instruments, and o exposure to and management of financial risks.

Going ConcernThe Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months after the date on which the report and financial statements are signed. The Group has in place long-term debt facilities (including £35m of undrawn facilities at 31 March 2017), which provide adequate resources to finance committed property refurbishment and improvement programmes, and development, along with the Group’s day to day operations. The Group also has a long term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders’ covenants. In 2016/17 LMH has embarked on a re-financing plan to restructure its existing debt and release security for future growth in developments. Growth business plans have been approved by the existing syndicate lenders and further plans to secure future lending are in the final stages. These plans will have a positive effect on the group’s long term financial viability.Please refer to note 35 for further information.


54


Basis of ConsolidationThe Group accounts consolidate the accounts of the Association and its subsidiaries at 31 March using the purchase method.

2. Accounting policies (continued)

Significant judgements and estimatesPreparation of the financial statements requires management to make significant judgements andestimates. The items in the financial statements where these judgements and estimates have been made include:

Significant management judgementsThe following are the significant management judgements made in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Supporting peopleManagement judgement is applied in determining the extent to which the risks and benefit aretransferred to the association when considering the income to be recognised. £3.8m of supporting people income was recognised in the year.

Classification of loans as basic LMH has a number of loans which have a ‘two-way break clause’ which is applicable where theloan is repaid early and could result in a break cost or a break gain. The loans in question arefixed rate loans. In a prepayment scenario that results in a break gain, the loan agreementprovides for the repayment of the capital at par. Any break gain payable by the lender would be in relation to future interest periods only.

Management has considered the terms of the loan agreements and concluded that they do meetthe definition of a basic financial instrument, therefore are held at amortised cost.

ImpairmentAs part of the Group’s continuous review of the performance of their assets, management identify any homes, or schemes, that have increasing void losses, are impacted by policy changes orwhere the decision has been made of dispose of the properties. These factors are considered tobe an indication of impairment.

Where there is evidence of impairment, the fixed assets are written down to the recoverable amount and any impairment losses are charged to operating surpluses.

As a result, the Association estimated the recoverable amount of its housing properties as follows:

a) determined the level at which recoverable amount is to be assessed (i.e., the asset level or cash-generating unit (CGU) level).

b) estimated the recoverable amount of the cash-generating unit c) calculated the carrying amount of the cash-generating unit andd) compared the carrying amount to the recoverable amount to determine if an impairment loss

has occurred.

Based on this assessment, the association calculated the Depreciated Replacement Cost (DRC)of each social housing property scheme. Comparing this to the carrying amount of each scheme,we made an impairment charge against one of its social housing property schemes.


55


Estimation uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.


Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets each reporting date based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment and changes to decent homes standards which may require more frequent replacement of key components. Accumulated depreciation at 31 March 2017 was £75.4m.

Defined benefit obligation (DBO) Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses (as analysed in note 23). The liability at 31 March 2017 was £8.6m.

Turnover and Revenue Recognition Turnover is comprised of rental income receivable in the year, income from shared ownership first tranche sales and income from other services supplied in the year included at the invoiced value (excluding VAT where recoverable) and grants receivable in the year.

Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting, net of any voids. Income from first tranche sales is recognised at the point of legal completion of the sale. Revenue grants are receivable when the conditions for receipt of agreed grant funding have been met.

Corporation Tax HM Revenue and Customs has accepted that the Association is a charity for tax purposes and therefore its charitable activities are not subject to Corporation Tax. The Association’s subsidiaries, Housing Maintenance Solutions Limited and LMH Developments Limited, have no such exemption and their activities are chargeable to Corporation Tax. Commutual is a registered charity and its activities are not subject to Corporation Tax.

Corporation tax is recognised for the amount of income tax payable in respect of the taxable surplus for the current or past reporting periods using the tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred Taxation The payment of taxation is deferred or accelerated because of timing difference between the treatment of certain items for accounting and taxation purposes. Except as noted below, full provision for deferred taxation is made under the incremental liability method on all timing differences that have arisen, but not reversed by the balance sheet date.

Deferred tax is measured at the tax rates that are expected to apply in the periods when the timing difference are expected to reverse, based on tax rates and law enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.


56


Value Added TaxThe Group charges Value Added Tax (VAT) on some of its income and is able to recover part ofthe VAT it incurs on expenditure. The financial statements include VAT to the extent that it is suffered by the Group and not recoverable from HM Revenue and Customs. The balance of VAT payable or recoverable at the year-end is included as a current liability or asset.

Interest payable Interest is capitalised on borrowings to finance developments to the extent that it accrues in respect of the period of development if it represents either:

a) Interest on borrowings specifically financing the development programme after deduction ofsocial housing grant (SHG) received in advance; or

b) A fair amount of interest on borrowings of the Group as a whole after deduction of SHGreceived in advance to the extent that they can be deemed to be financing the developmentprogramme.

Other interest payable is charged to income and expenditure in the year.

Financial InstrumentsFinancial Instruments which meet the criteria of a basic financial instrument as defined in Section 11 of FRS 102 are accounted for under an amortised historic cost model. Management hasreviewed the Group’s loan agreements and has deemed them to be basic financial instruments.

DebtorsShort term debtors are measured at the transaction price, less any impairment. Loans receivableare measured initially at fair value, net of transaction costs, and are measured subsequently atamortised cost using the effective interest method, less any impairment.

CreditorsShort term trade creditors are measured at the transaction price. Other financial liabilities,including bank loans, are measured initially at fair value, net of transaction costs, and aremeasured subsequently at amortised cost using the effective interest method.

PensionsThe Group participates in the Merseyside Pension Fund (‘MPF’) and the Cheshire Pension Fund (CPF), part of the Local Government Pension Scheme (LGPS), a multi-employer defined benefitscheme.

On 1 October 2014 The Association secured a new contract with Chester West and ChesterCouncil. It was a requirement of the contract that current members of the Cheshire Pension Fund(CPF) transferring under TUPE to the successful contractor remained in that scheme. Thisresulted in LMH attaining admitted body status to the fund. Cheshire West and Chester Council isthe administering authority for the Cheshire Pension Fund under the regulations governing theLocal Government Pension Scheme, a defined benefit scheme.

For the MPF and CPF, scheme assets are measured at fair values. Scheme liabilities aremeasured on an actuarial basis using the projected unit method and are discounted at appropriatehigh quality corporate bond rates. The net surplus or deficit is presented separately from other netassets on the balance sheet. A net surplus is recognised only to the extent that it is recoverable by the Group.


57



The current service cost and costs from settlements and curtailments are charged against operating profit. Past service costs are recognised in the current reporting period. Interest is calculated on the net defined benefit liability. Re-measurements are reported in other comprehensive income.

The Group also provides a Group Pension Scheme supplied by AVIVA. The income and expenditure charge represents the employer contribution payable to the scheme for the accounting period.

Housing Properties Housing properties are properties held for the provision of social housing or to otherwise provide social benefit. Housing properties are principally properties held for rent and are stated at cost less accumulated depreciation and impairment losses. Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development period.

Works to existing properties which replace a component that has been treated separately for depreciation purposes, along with those works that result in an increase in rental income over the lives of the properties, thereby enhancing the economic benefits of the assets are capitalised as improvements. Capitalised improvements are subject to the Capitalisation Policy approved by Board in September 2014.

Development costs are capitalised on handover of individual units that are available for rent. Development units not completed and available for rent are held as assets under construction. Development projects include New Build developments, Mortgage Rescue and Empty Homes.

Housing properties are held at deemed cost, the Group took advantage of the transitional relief when adopting FRS102.

Expenditure on shared ownership properties is split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover, and the remaining element is classed as fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment.

Investment properties Investment properties consist of properties not held for the social benefit or for use in the business. Investment properties are measured at cost on initial recognition and subsequently at fair value as at the year end, with changes in fair value recognised in income and expenditure.


58



Government grantsGovernment grants include grants receivable from the Homes and Communities Agency (HCA),local authorities, and other Government organisations. Government grants received for housing properties are recognised in income over the useful life of the housing property structure unlessprovided in relation to individual components (excluding land) under the accruals model.

Grant relating to revenue is recognised in income and expenditure over the same period as theexpenditure to which they relate once reasonable assurance has been gained that the entity will comply with the conditions and that the funds will be received.

Grants due from Government organisations or received in advance are included as current assetsor liabilities.

Government grants received for housing properties are subordinated to the repayment of loans by agreement with the HCA. Government grants released on sale of a property may be repayable butare normally available to be recycled and are credited to a Recycled Capital Grant Fund andincluded in the statement of financial position in creditors.

If there is no requirement to recycle or repay the grant on disposal of the asset, any unamortisedgrant remaining within creditors is released and recognised as income and expenditure.

Where individual components are disposed of and this does not create a relevant event forrecycling purposes, any grant which has been allocated to the component is released to incomeand expenditure. Upon disposal of the associated property, the group is required to recycle theseproceeds and recognise them as a liability.

Other grantsGrants received from non-government sources are recognised using the performance model. Agrant which does not impose specified future performance conditions is recognised as revenuewhen the grant proceeds are received or receivable. A grant that imposes specific futureperformance-related conditions on the Group is recognised only when these conditions are met. Agrant received before the revenue recognition criteria are satisfied is recognised as deferredincome.


59



Depreciation of housing properties Freehold land is not depreciated. Depreciation of buildings is charged so as to write down the net book value to the estimated residual value, on a straight-line basis, over their estimated useful economic lives in the business. Major components are treated as separable assets and depreciated over their expected useful economic lives or the lives of the structure to which they relate, if shorter, at the following annual rates:

Bathrooms 30 years Communal Doors 30 years Communal Works 20 years External Doors 30 years Central Heating – boilers 15 years Central Heating – carcass 30 years Kitchens 20 years Render 25 years Structure 60 years Windows 30 years Wiring 30 years Environmental – Flats 30 years Environmental – Houses 20 years Partial Wiring 10 years Lifts 15 years Comm Care door entry 15 years Solar Panels 25 years

ImpairmentImpairment of Housing properties is considered annually, under the guidance set out in Section 27 of FRS102.

Annually housing properties are assessed for impairment indicators. Where indicators are identified an assessment for impairment is undertaken comparing the scheme’s carrying amount to its recoverable amount. Where the carrying amount of a scheme is deemed to exceed its recoverable amount, the scheme is written down to its recoverable amount. The resulting impairment loss is recognised as operating expenditure. Where a scheme is currently deemed not to be providing service potential to the association, its recoverable amount is its fair value less costs to sell.

Where there is evidence of impairment, housing fixed assets are assessed as follows:

� The level of which to assess the impairment (individual property or scheme) � Estimate the recoverable amount of the asset � Calculate the carrying value of the asset � Compare the carrying amount to the recoverable amount to determine if an impairment loss

has occurred

An impairment loss occurs when the carrying amount of an asset exceeds its recoverable amount. This impairment loss is recognised within the profit & loss account as expenditure and disclosed as a separate line within the operating expenditure where it is considered material.


60



Other tangible fixed assets Other tangible fixed assets are measured at cost less accumulated depreciation and anyaccumulated impairment losses.

Depreciation is provided evenly on the cost of other tangible assets to write them down to theirestimated residual values over their expected useful lives on a straight line basis. The currentexpected useful economic life of the Group’s other tangible assets on which their depreciation is based, are as follows:

sraey3tnempiuqEdnatnalPFurniture, Fixtures and Fittings 4 years Computer and Office Equipment 3-5 yearsVehicles 3 yearsLeasehold Properties 50 years Leasehold Improvements 10 years or the length of

the lease if shorter

Depreciation is charged to Income and Expenditure.

Gains and losses arising on the disposal of other tangible fixed assets are determined as thedifference between the disposal proceeds and the carrying amount of the assets and arerecognised as part of the surplus/deficit for the year.

Leased assetsLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group. All other leases areclassified as operating leases.

Assets held under finance leases are recognised initially at the fair value of the leased asset (or, iflower, the present value of minimum lease payments) at the inception of the lease. Thecorresponding liability to the lessor is included in the statement of financial position as a financelease obligation. Lease payments are apportioned between finance charges and reduction of thelease obligation using the effective interest method so as to achieve a constant rate of interest onthe remaining balance of the liability. Finance charges are deducted in measuring the surplus ordeficit. Assets held under finance leases are included in tangible fixed assets and depreciated andassessed for impairment losses in the same way as owned assets.

Rentals payable under operating leases are charged to income and expenditure on a straight-linebasis over the lease term, unless the rental payments are structured to increase in line with expected general inflation, in which case the Group recognises annual rent expense equal toamounts owed to the lessor.

The aggregate benefit of lease incentives are recognised as a reduction to the expense recognised over the lease term on a straight line basis.


61



Provisions for liabilities Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value using a pre-tax discount rate. The unwinding of the discount is recognised as a finance cost in income and expenditure in the period it arises.

Reserves The group establishes restricted reserves for specific purposes where their use is subject to external restrictions. Reserves are restricted on receipt of specific donations to the Group’s charity. Revenue reserves relate to historic surpluses and deficits from Group activities.

Revaluation reserve The difference on transition between the fair value of social housing properties and the historical cost carrying value is credited to the revaluation reserve.


62


3. Turnover, cost of sales, operating costs and operating surplus – continuing activities

Group

Association

Other income relates to Cheshire West and Chester Contract.

2017Turnover

2017Operating

Costs

2017Operating

Surplus/(deficit)

2016Turnover

2016Operating

Costs

2016Operating

Surplus/(deficit)

£’000 £’000 £’000 £’000 £’000 £’000Social housing lettings 68,386 (41,235) 27,151 65,152 (46,487) 18,665

Supporting People 3,872 (2,421) 1,451 4,010 (2,695) 1,315First Tranche shared ownership sales

149 - 149 225 (133) 92

72,407 (43,656) 28,751 69,387 (49,315) 20,072

Activities other than social housing

3,617 (3,237) 370 3,268 (3,012) 256

76,024 (46,893) 29,131 72,655 (52,327) 20,328

2017Turnover

2017Operating

Costs

2017Operating

Surplus/(deficit)

2016Turnover

2016Operating

Costs

2016Operating

Surplus/(deficit)

£’000 £’000 £’000 £’000 £’000 £’000Social housing lettings 67,094 (42,902) 24,192 65,361 (49,016) 16,345

Supporting People 3,872 (2,421) 1,451 4,010 (2,695) 1,315First Tranche shared ownership sales

149 - 149 225 (133) 92

71,115 (45,323) 25,792 69,596 (51,844) 17,752

Activities other than social housing

3,617 (3,242) 375 3,268 (3,012) 256

74,732 (48,565) 26,167 72,864 (54,856) 18,008


63


3. Group turnover, cost of sales, operating costs and operating surplus –(continued)

Particulars of income and expenditure from social housing lettings

2017 General Housing

2017 Temporary

Social Housing

2017 Supported

housing and

sheltered

2017 Low cost

home ownership

2017 Total

2016 Total

£’000 £’000 £’000 £’000 £’000 £’000

Rent receivable net of identifiable service charges

62,544 319 2,716 3 65,582 65,222

Service charge income 1,478 1,023 1,151 - 3,652 3,078 Amortisation of government grants

207 - - - 207 79

Other grants - - - - - 36 Management fee in respect of unsustainable stock 57 - - - 57 (4) Miscellaneous income 2,758 - 5 146 2,909 976

Turnover from social housing lettings 67,044 1,342 3,872 149 72,407 69,387

Management services (14,674) (859) (1,198) - (16,731) (18,316) Repairs service (11,207) (104) (373) - (11,684) (11,148) Improvement programme (1,076) - (9) - (1,085) (2,226) Bad debts (851) (33) (14) - (898) (843) Depreciation of housing properties

(12,051) (23) (827) - (12,901) (12,926)

Impairment of housing properties

- - - - - (3,271)

Other costs (357) - - - (357) (585)

Operating expenditure on social housing lettings

(40,216) (1,019) (2,421) - (43,656) (49,315)

Operating surplus on social housing lettings

26,828 323 1,451 149 28,751 20,072

Void losses 449 146 52 - 647 1093


64


3. Associations turnover, cost of sales, operating costs and operating surplus –(Continued)

Particulars of income and expenditure from social housing lettings

2017General Housing

2017Temporary

SocialHousing

2017Supported

housingand

sheltered

2017Low cost

homeownership

2017Total

2016Total

£’000 £’000 £’000 £’000 £’000 £’000

Rent receivable net ofidentifiable service charges

62,544 319 2,716 3 65,582 65,222

Service charge income 1,478 1,023 1,151 - 3,652 3,078Amortisation ofgovernment grants

207 - - - 207 79

Other grants - - - - - 36Management fee in respectof unsustainable stock 57 - - - 57 (4)Miscellaneous income 1,466 - 5 146 1,617 1,185

Turnover from socialhousing lettings 65,752 1,342 3,872 149 71,115 69,596

Management services (16,426) (859) (1,198) - (18,483) (21,023) Repairs service (11,207) (104) (373) - (11,684) (11,148) Improvement programme (1,076) - (9) - (1,085) (2,226)Bad debts (851) (33) (14) - (898) (843)Depreciation of housing properties

(11,966) (23) (827) - (12,816) (12,748)

Impairment of housingproperties

- - - - - (3,271)

Other costs (357) - (-) - (357) (585)

Operating expenditure on social housing lettings

(41,883) (1,019) (2,421) - (45,323) (51,844)

Operating surplus on socialhousing lettings

23,869 323 1,451 149 25,792 17,752

Void losses 449 146 52 - 647 1,093


65


4. Accommodation in management & development – Group & Association

At the end of the year accommodation in management for each class of accommodation was as follows:

2017 2016 Number Number

Social Housing 14,530 14,398 - Social rent 13,179 13,507 - Affordable rent 1,351 891 Supported Housing and housing for older people 722 721 Shared Ownership 18 6

Temporary Social Housing 64 64

Total Owned 15,334 15,189

General needs housing on leasehold 37 37

Total Owned and Leased 15,371 15,226

Non-social housing Retails Units 7 7 Other lease rentals - -

Total Social & Non-social Housing Properties 15,378 15,233 owned and managed

Accommodation in development at year end 341 372

General needs housing leased from others relates to stock owned by Liverpool City Council, which is leased to the Association until their decant and demolition. Of the 37 properties, none were tenanted as at 31 March 2017 (31 March 2016: 1 of 37). These properties have been designated as unsustainable by the Council. The costs associated with delivery of the lease agreement with the Council are financed by the Council, net of any rental income LMH receives from tenants.


66


5. Operating Surplus

Group

This is arrived at after charging: 2017£’000

2016£’000

Depreciation of Housing properties 12,620 11,918Impairment of Housing properties - 3,271Depreciation of other tangible fixed assets 775 1,009

Operating lease rentalsLand and Buildings 281 601Motor Vehicles 641 513

Auditors remuneration (excluding VAT) For audit services 31 36For non-audit services Tax compliance 10 9Tax advisory others 16 6

Association

This is arrived at after charging: 2017£’000

2016£’000

Depreciation of Housing properties 12,620 11,918Impairment of Housing properties - 3,271Depreciation of other tangible fixed assets 670 831

Operating lease rentalsLand and Buildings 264 597Motor Vehicles - -

Auditors remuneration (excluding VAT) For audit services 31 36For non-audit services Tax compliance 10 9Tax advisory others 3 6


67


6. Surplus on sale of fixed assets – housing properties Group and Association

2017 2016 £’000 £’000

Proceeds 4,521 3,516 Share of Right-to-Buy receipts due to Liverpool City Council (1,538) (1,337)

Disposal proceeds 2,983 2,179 Carry value of fixed assets (1,844) (853)

1,139 1,326

7. Interest receivable and other income

Group 2017 2016 £’000 £’000

Interest receivable 167 223

Association

2017 Restated

2016 £’000 £’000

Interest receivable 164 219

8. Interest payable and similar charges

Group 2017 2016 £’000 £’000

Loans and bank overdrafts 6,274 6,315

Interest payable capitalised on housing properties under construction

(964) (734)

5,310 5,581 Capitalisation rate used to determine the finance costs capitalised during the period 5.00% 5.08%


68


8. Interest payable and similar charges (continued)

Association2017 2016£’000 £’000

Loans and bank overdrafts 6,269 6,315

Interest payable capitalised on housingproperties under construction

(964) (734)

7,543 5,581Capitalisation rate used to determine thefinance costs capitalised during the period 5.00% 5.08%

9. Employees

Average monthly number of employees expressed in full time equivalents:

Group

2017 2016No. No.

Administration 86 95Regeneration and technical services 54 61General Housing 155 160Supported housing and independent Living 9 15Environmental 19 25General repairs and Maintenance 233 235Other 15 9

571 600

Employee costs:Group

2017 2016£’000 £’000

Wages and salaries 16,164 16,907Social security costs 1,504 1,504Other pension costs 1,177 1,311

18,845 19,722


69


9. Employees (continued)

Average monthly number of employees expressed in full time equivalents:

Association

2017 2016 No. No.

Administration 53 67 Regeneration and technical services 54 61 General Housing 136 160 Supported housing and independent Living 9 15 Other 9 9

261 312

Employee costs: Association

2017 2016 £’000 £’000

Wages and salaries 8,791 9,620 Social security costs 864 840 Other pension costs 985 1,111

10,640 11,571

The Group operates three pension funds for employees, the Merseyside Pension Fund (MPF), Cheshire Pension Fund, and LMH Group Pension Scheme supplied by AVIVA.

The full time equivalent number of staff who received remuneration, including directors:

2017 2016 No. No. £60,000 to £70,000 3 3 £70,001 to £80,000 3 5 £80,001 to £90,000 - - £90,001 to £100,000 - - £100,001 to £185,000 3 3


70


10. Board members and Executive Directors

The aggregate emoluments of the executive officers were £485,845 (2016: £478,707). A further£71,516 was paid in respect of the pension contributions (2016: £71,516).

Group and Association

2017 2017 2017 2017 2017 2016Basicsalary

Benefitsin kind

Pensioncontributions

Employers NIC

Total

£’000 £’000 £’000 £’000 £’000 £’000

Chief Executive Steve Coffey 168 17 31 24 239 236

Executive DirectorsPeter Fieldsend 118 12 22 17 168 166Angela Forshaw 105 11 19 15 150 149

Chair of the BoardBill Lacey 15 - - 1 16 16

Vice Chair of theBoard Will Roby 9 - - - 9 -

415 39 72 57 582 576

Two of the Board members received emoluments during the year amounting to £24,000 (2016:£24,000). Expenses paid during the year to Board members amounted to £2,349 (2016: £2,421).

The emoluments of the highest paid Director, the Chief Executive, excluding pension contributions, was £184 305 (2016: £182,417). Pension contributions of £30,662 have also been paid (2016: £30,662).

Pension costs are shown as contributions paid on the executive officer’s behalf. The ChiefExecutive is a member of the Merseyside Pension Fund. He is an ordinary member of the pensionscheme and no enhanced or special terms apply. The Association does not make any furthercontribution to any individual pension arrangement for the Chief Executive.


71


11. Tax on Ordinary Activities

Group

By virtue of LMH’s charitable status, the Group is largely exempt to UK Corporation Tax. However, its subsidiary companies, HMS and LMHD, are subject to tax but have elected to make a Gift Aid donation equal to their taxable profit to LMH and ComMutual.

2017 Restated

2016 £’000 £’000

Current tax UK corporation tax 201 33 Total current tax 201 33

Deferred tax Net origination and reversal of timing differences (6) (4) Adjustment in respect of prior periods (4) Effect of tax rate change on opening balance 1 2 Total deferred tax (9) (2)

Total tax on results on ordinary activities 192 31

Total tax reconciliation2017

Restated 2016

£’000 £’000

Surplus on ordinary activities before tax 24,904 16,035

Theoretical tax at UK Corporation tax rate of 20% (2016: 20%) 4,981 3,207

Effects of: Fixed asset differences 7 12 Expenses not deductible for tax purposes - - Income not taxable for tax purposes (4,312) (2,743) Adjust closing deferred tax to average rate 2 3 Prior year movement of current tax for gift aid (480) (448) Adjustment in prior periods (6) - Total tax charge 192 31

The aggregate current and deferred tax relating to items that are recognised as items of other comprehensive income is £nil (2016: £nil).


72


12. Fixed assets – housing properties


Social housingpropertyheld for

letting

Social housingproperty

underconstruction

Completedshared

ownership housing

properties

Total housing

properties

£’000 £’000 £’000 £’000CostAt 1 April 2016 383,347 22,924 503 406,774Works to existingproperties

10,649 - - 10,649

Acquisitions - 26,538 - 26,538Interest capitalised - 964 - 964Schemes completed 35,105 (35,105) 1,671 1,671Disposals (2,178) - (146) (2,324)At 31 March 2017 426,925 15,321 2,028 444,272

Depreciation and impairmentAt 1 April 2016 55,729 - 133 55,862Charged in year 12,614 - 6 12,620Released on disposal (360) - - (360)At 31 March 2017 67,983 - 139 68,122

Net book valueAt 31 March 2017 358,941 15,321 1,889 376,150At 31 March 2016 327,618 22,924 370 350,912

2017£’000

2016£’000

Housing Properties atHistorical cost 444,104 405,050Depreciation and impairment (58,878) (46,618)

Total 385,226 358,432

Housing properties are stated at deemed cost as the Association elected to take advantage of thetransitional relief when it adopted FRS102.


73


12. Fixed assets – housing properties (continued)

The actual consideration paid for the properties was £nil. Expenditure on works to existing properties in the year may be summarised as:

2017 £’000

2016 £’000

Amounts capitalised 10,649 18,606 Amounts charged to income and expenditure 1,085 843 Total 11,734 19,449

Housing properties book value, net of depreciation and grants, comprises:

2017 £’000

2016 £’000

Freehold land and buildings 353,676 322,353 Long leasehold land and buildings 5,265 5,265

Total 358,941 327,618

Social housing assistance 2017 £’000

2016 £’000

Total accumulated social housing grant received or receivable at 31 March 152,653 146,172

Recognised in Statement of Comprehensive Income 136,237 136,047 Held as deferred income 16,416 10,125 Total 152,653 146,172

Finance costs 2017 £’000

2016 £’000

Aggregate amount of finance costs included in the cost of housing properties 1,698 734

Impairment

The Group considers individual schemes to be separate Cash Generating Units (CGU’s) when assessing for impairment, in accordance with the requirements of Financial Reporting 102 and SORP 2014.


74


13. Tangible fixed assets - other

GroupPlant &

EquipmentFurniture

fixtures and fittings

Computers and office

equipment

Vehicles Leasehold Improvement

Total

£,000 £’000 £’000 £’000 £’000 £’000CostAt 1 April 2016

232 3 638 48

Additions 1 333 19 - 14 367 At 31 March 2017

233 4,760 3,657 48 2,908 11,606

DepreciationAt 1 April 2016

189 3 431 37 631

Charged inyear

44 382 137 11 201 775

At 31 March 2017

233 3,952 3,568 48 832 8,633

Net bookvalue

At 31 March 2017

- 808 89 - 2,076 2,973

At 31 March 2016

43 857 207 11 2,263 3,381


75


13. Tangible fixed assets (continued)

Association Plant &

Equipment Furniture

fixtures and fittings

Computers and office

equipment

Vehicles Leasehold Improvement

Total

£’000 £’000 £’000 £’000 £’000 £’000Cost At 1 April 2016

- 4,022 3,008 48 2,009 9,087

Additions - 331 15 - 14 360 At 31 March 2017

- 4,353 3,023 48 2,023 9,447

Depreciation At 1 April 2016

- 3,145 2,868 38 615 6,665

Charged in year

- 401 76 10 203 670

At 31 March 2017

- 3,546 2,944 48 818 7,355

Net book value

At 31 March 2017

- 807 79 - 1,205 2,092

At 31 March 2016

- 877 139 10 1,394 2,421

The Group and Association do not hold any assets under finance leases.


76


14. Investment properties non-social housing properties held for letting

Group and Association 2017£’000

At 1 April 2016 925Additions -Increase in value -At 31 March 2017 925

Investment properties were valued as at 31 March 2017. The group’s investment properties have been valued at market value by Keppie Massie Surveyors.

15. Investment in subsidiaries

Association

During the year the association had recharged amounts to Housing Maintenance Solutions Ltd (HMS), LMH Developments Ltd (LMHD) and ComMutual unregistered entities:

Amounts recharged to HMS Ltd

Allocation basis2017£’000

2016£’000

Management services percentage of payroll costs 651 666Recharge of rent on property Lease agreement 74 80

725 746

Amounts recharged to LMHD Ltd


2016£’000

Management services percentage of payroll costs 35 -35 -

Amounts recharged to ComMutual


2016£’000

Management services percentage of payroll costs 25 -25 -

The Association owns 100% of the issued share capital of HMS and LMHD. The Associationcontrols ComMutual via its rights to appoint or to remove the Trustees.

HMS provides building and property maintenance services. It is incorporated in England andWales.


77


15. Investment in subsidiaries (continued)

LMHD provides new-build properties. It is incorporated in England and Wales.

ComMutual is a registered charity providing support to its communities and LMH tenants.

2017 £’000

2016 £’000

At 1 April 2016 2,800 2,800

Additions 250 -

At 31 March 2017 3,050 2,800

16. Properties for sale


Shared ownership properties 2017 £’000

2016 £’000

Work in progress 2,335 779 2,335 779

17. Stock and WIP

Group

2017 £’000

2016 £’000

Raw Materials 358 83 Consumables 14 9 Shared ownership first tranche sales 2,409 -

2,781 92

Association

2017 £’000

2016 £’000

Consumables 14 13 Shared ownership first tranche sales 2,409 -

2,424 13


78


18. Debtors

Group2017 2016£’000 £’000

Due within one yearRent and service charges receivable 5,556 5,932Less: Provision for bad and doubtful debts (5,458) (5,699)

98 233

Other debtors 1,791 3,461Interest receivable 24 67Prepayments and accrued income 2,470 741

4,378 4,501Amounts falling due after one yearLeaseholder sinking fund arrears 3,050 3,130

7,433 7,631

Association 2017 2016£’000 £’000

Due within one yearRent and service charges receivable 5,556 5,932Less: Provision for bad and doubtful debts (5,458) (5,699)

Amounts owed by Group undertakings

98

120

233

-Other debtors 1,509 879Interest receivable 24 67Prepayments and accrued income 2,253 680

4,004 1,859Amounts falling due after one year 3,050 3,130

7,054 4,989

Amounts falling due after one year are in respect of amounts due from leaseholders relating to communal and environmental works undertaken.


79


19. Creditors: amounts falling due within one year

Group

2017 Restated

2016 £’000 £’000

Trade creditors 2,161 2,105 Rent and service charges received in advance 1,447 1,243 Loan principal due within 1 year (note 22) 10,000 10,000 Other taxation and social security 1,714 500 Other creditors 597 835 Social housing grant received in advance 228 144 Accruals and deferred income 9,772 10,114 Corporation tax 677 480

26,596 25,421 Association

2017 Restated

2016 £’000 £’000

Trade creditors 660 1,511 Rent and service charges received in advance 1,447 1,243 Amounts owing to Group undertakings 9,171 2,564 Loan principal due within 1 year (note 22) 10,000 10,000 Other taxation and social security 1,499 284 Other creditors 322 803 Social housing grant received in advance 228 144 Accruals and deferred income 7,779 7,911

31,106 24,460

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

Group and Association 2017 2016 £’000 £’000

Debt (note 24) 110,000 110,000 Less: unamortised loan arrangement fees (1,775) (1,864)

108,225 108,136

Grants received in Advance 16,188 9,981 Recycled capital grant 26 - Disposal proceeds fund 1,194 1,086

125,633 119,203

Retained proceeds from strategic disposals are held to be used for Social Housing purposes as per clause 22 of the LMH transfer agreement. Social Housing purposes include the provision of accommodation for sale or letting at affordable or below market rents to persons in housing need. This includes the development of new homes or the provision of accommodation for general needs tenants.


80


21. Recycled capital grant

Group and Association 2017 2016£’000 £’000

At 1 April 2016 - -Grants recycled 26Withdrawals - -

26 -

Repayment of grant - -At 31 March 2017 26 -

22. Deferred grant income


2016£’000

At 1 April 10,125 4,697Grant received in the year 6,498 5,507Released to income in the year (207) (79)

16,416 10,125

2017£’000

2016£’000

Amounts to be released within one year 228 144Amounts to be released in more than one year 16,188 9,981

16,416 10,125

23. Disposal Proceeds Fund


2016£’000

At 1 April 1,086 1,034Net sales proceeds recycled 108 52Withdrawals - -

1,194 1,086

Withdrawals from the disposal proceeds fund were used for approved works to existing housingproperties.

As at 31 March 2017, there are no amounts due for repayment in the next year and £nil has beenpaid in the year.


81


24. Debt analysis

Group and Association 2017 2016 £’000 £’000

Due within one year Bank Loans 10,000 10,000

10,000 10,000 Due after more than one year Bank loans 110,000 110,000 Less: issue costs (581) (778)

109,419 109,222

119,419 119,222

The Group’s bank loans are secured by a fixed charge over all freehold and leasehold properties vested in the Association at the transfer of housing property from Liverpool City Council on 1 April 2008 and pursuant to the transfer agreement, as well as various related assets such as fixtures, insurance claims and returns, licences and book debts.

The Association’s debt is subject to the following interest rates and maturities:

Loan Amount Maturity Date Interest Rate £15 million December 2033 4.93% - 5.03% £20 million October 2034 5.19% - 5.29% £25 million October 2030 5.28% - 5.38% £25 million October 2026 5.36% - 5.46% £25 million October 2022 5.99% - 6.05% £10 million July 2017 0.58%

The maturity on the arrangements does not lead to a requirement to repay the debt.

At 31 March 2017 the Association has un-drawn loan facilitates of £35 million (2016: £35 million).

Based on the lender’s earliest repayment date, borrowings are repayable as follows:

Group and Association 2017 £’000

2016 £’000

Within one year 10,000 10,000 Five years or more 110,000 110,000

120,000 120,000

The Group is currently in negotiations with the current syndicate funders to re-finance the existing loan portfolio. Please refer to note 35 for further details.


82


25. Employees

Merseyside Pension Fund Group and Association

The MPF is a multi-employer scheme, administered by Wirral Metropolitan Borough Council under the regulations governing the Local Government Pension Scheme, a defined benefit scheme.The most recent formal actuarial valuation was completed as at 31 March 2016 and rolled forwardto 31 March 2019 by a qualified independent actuary.

The Employer contributions to the MPF by the Group for the year ended 31 March 2017 were £789,000 (31 March 2016: £925,000). Employer contributions were made at a rate of 18.3% ofpensionable salaries during 2016/17 (18.3% 2015/16). Contributions will increase to 18.8% untilthe next valuation is completed in 2020.

Financial assumptions

For the purposes of calculation of the Group’s pension costs, it is assumed that at retirement 50%of retirees will take the maximum cash commutation of pension for lump sum and 50% of retireeswill take 3/80ths cash sum (the standard for pre April 2008 Service). Members have the option to commute part of their pension at retirement in return for a lump sum at a rate of £12 cash for each£1 per annum of pension given up.

Employee costs:

Mortality assumptionsThe mortality assumptions will be based on the most up-to-date information published by the Continuous Mortality Investigation Bureau, making allowance for future improvements in longevityand the experience of the scheme.

For all members, it is assumed that the accelerated trend in longevity seen in recent years willcontinue in the longer term and as such, the assumptions build in a minimum level of longevity‘improvement’ year on year in the future in line with the CMI projections subject to a minimum rateof improvement of 1.5% per annum.

The assumed life expectations on retirements at age 65 are:

31-Mar-16 31-Mar-16% per annum % per annum

23.2noitalfnIIPCfoetaR5.38.3seiralasniesaercnifoetaR

Rate of increase in pensions in payment 2.3 26.36.2etaRtnuocsiD

31-Mar-16 31-Mar-16No. of years No. of years

Retiring today:5.229.12selaM4.527.42selameF

Retiring in 20 years9.429.42selaM2.827.72selameF


83



Amounts recognised in surplus or deficit 2017 £’000

2016 £’000

Current service cost 856 1,118 Administration costs 19 22 Loss on settlements - 126 Amounts charged to operating costs 875 1,266

2017 £’000

2016 £’000

Net interest 220 256 Amounts charged to other finance costs 220 256

Reconciliation of opening and closing balances of the present value of scheme liabilities:

Reconciliation of opening and closing balances of the present value of scheme assets:

2017 2016 £’000 £’000

Opening scheme liabilities 49,010 49,690 Current service cost 856 1,118 Member contributions 262 314 Interest on pension scheme liabilities 1,759 1,684 Remeasurement (gain)/loss 8,590 (3,288) Curtailments - 126 Benefits paid (564) (634) Closing scheme liabilities 59,913 49,010

2017 2016 £’000 £’000

Opening fair value of plan assets 42,520 41,683 Interest on plan assets 1,539 1,428 Remeasurement (loss) / gain 6,802 (1,174) Employer contributions 789 925 Admin expenses (19) (22) Member contributions 262 314 Benefits paid (564) (634) Share of scheme assets at end of period 51,329 42,520


84



Actual return on plan assets: 2017£’000

2016£’000

Actual return on scheme assets 8,892 255

Major categories of plan assets as a percentage of total plan assets

2017%

2016%

Equities 53.6 51.8Government bonds 4.0 4.6Other Bonds 11.4 11.3Property 7.8 8.9Cash/Liquidity 3.4 3.4Other 19.8 20.0

Cheshire Pension Fund Group and Association

The CPF is a multi-employer scheme, administered by Cheshire West and Chester Council underthe regulations governing the Local Government Pension Scheme, a defined benefit scheme.The most recent formal actuarial valuation was completed as at 31 March 2014 and rolled forwardto 31 March 2017 by a qualified independent actuary.

The Employer contributions to the CPF by the Group for the year ended 31 March 2017 were £ (2016: £26,000). Employer contributions were made at a rate of 22.8% of pensionable salariesduring 2016/17. Contributions will remain at 22.8% until the next valuation is completed in 2017.

Financial assumptions

An allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMRC limits for pre-April 2008 service and 75% of the maximum tax-free cash forpost-April 2008 service.

Employee costs:Mortality assumptionsLife expectancy is based on the Fund's VitaCurves with improvements in line with the CMI 2010 model assuming current rates of improvement have peaked and will converge to a long term rateof 1.25%

31-Mar-16 31-Mar-16% per annum % per annum

2.24.2noitalfnIIPCfoetaR2.37.2seiralasniesaercnifoetaR

Rate of increase in pensions in payment 2.4 2.25.36.2etaRtnuocsiD


85



The assumed life expectations on retirements at age 65 are:

Amounts recognised in surplus or deficit 2017 £’000

2016 £’000

Current service cost 21 43 Amounts charged to operating costs 21 43

2017 £’000

2016 £’000

Net interest 3 5 Amounts charged to other finance costs 3 5

Reconciliation of opening and closing balances of the present value of scheme liabilities:

31-Mar-16 31-Mar-16No. of years No. of years

Retiring today:Males 22.3 22.3Females 24.5 24.4Retiring in 20 yearsMales 23.9 24.1Females 26.5 26.7

2017 2016 £’000 £’000

Opening scheme liabilities 627 611 Current service cost 21 43 Member contributions 4 7 Past service costs 13 Interest on pension scheme liabilities 22 21 Remeasurement (gain)/loss 55 (68) Benefits paid (4) - Closing scheme liabilities 725 627


86



Reconciliation of opening and closing balances of the present value of scheme assets:

Actual return on plan assets: 2017£’000

2016£’000

Actual return on scheme assets 96 10

Major categories of plan assets as a percentage of total plan assets

2017%

2016%

Equities 55.0 54.0Bonds 36.0 36.0Property 7.0 8.0Cash/Liquidity 2.0 2.0

2017 2016£’000 £’000

Opening fair value of plan assets 534 475Interest on plan assets 19 16Remeasurement (loss) / gain 60 10Employer contributions 32 26Member contributions 4 7Benefits paid (4)Share of scheme assets at end of period 645 534


87


26. Provision for liabilities – other provisions

Group Dilapidations Insurance

claims Deferred

tax Other Total

£’000 £’000 £’000 £’000 £’000

At 1 April 2016 134 227 - 124 485 Additions 86 63 164 313 Utilised - - (103) (103) Reversals (55) - (22) (77) Origination and reversal of timing differences

- - - -

Changes in tax rates

- - - - -

At 31 March 2017 165 290 - 163 618

Association Dilapidations Insurance

claims Deferred

tax Other Total

£’000 £’000 £’000 £’000 £’000

At 1 April 2016 86 172 - 124 382 Additions 10 59 8 77 Utilised - - (103) (103) Reversals (55) - (22) (77) Origination and reversal of timing differences

- - - -

Changes in tax rates

- - - -

At 31 March 2017 41 231 7 279

27. Deferred taxation

Group2017 £’000

2016 £’000

At 1 April 2016 (20) (18) Charge / (credit) for the year (9) (2) At 31 March 2017 (29) (20)

Accelerated capital allowance (20) (20) Other permanent differences (9) -

At 31 March 2017 (29) (20)


88


28. Non-equity share capital

2017 2016Shares of £1 each issued and fully paidAt 1 April 2016 152 152Joining during the year - -Leaving during the year - -

At 31 March 2017 152 152

The shares provide members with the right to vote at general meetings, but do not provide anyrights to dividends or distributions on a winding up.

29. Cash flow from operating activities

2017£’000

2016£’000

Surplus for the year 24,712 16,004Adjustments for non-cash items: Depreciation of housing properties 12,620 15,005Depreciation of other fixed assets 775 1,010Surplus/(deficit) on sale of tangible fixed assets (1,139) (1,326)Pensions costs less contributions payable 298 632Decrease / (increase) in debtors 198 813Decrease / (increase) in creditors 1,559 1,664Decrease / (increase) in stock (2,689) -Decrease / (increase) in provisions 133 (434)

Adjustments for investing or financing activities:Interest payable 5,310 5,581Interest receivable (167) (223)

New cash generated from operating activities 41,610 38,726

30. Capital commitments

Capital expenditure commitments were as follows, (net of VAT):

2017£’000

2016£’000

Capital ExpenditureExpenditure contracted for but not provided in the accounts 28,998 30,595Expenditure not contracted for but authorised by the Board 19,345 13,361

48,343 43,956

The above commitments will be financed primarily through cash and borrowings which are available for draw-down under existing loan arrangements.


89


31. Leasing commitments

Group

The Group’s future minimum operating leases payments are as follows:

2017 £’000

2016 £’000

Within one year 220 553 One to five years 1,165 1,427 More than five years 469 811

1,854 2,791 Association

The Association’s future minimum operating leases payments are as follows:

2017 £’000

2016 £’000

Within one year 291 291 One to five years 1,371 1,385 More than five years 541 811

2,203 2,487

32. Related parties

Bill Lacey, the Chairman of the Board until 31st March 2017, is currently employed as Development Director for the Torus Group, a Registered Provider operating in the North West.

At the year-end there were four tenant members of the Board - Tommy Colleran, Will Roby, Jane Mason and Ray Jones. In all four cases, tenancies are on standard commercial terms and they are not able to use their position to their advantage.

LMH has traded with HMS, a wholly-owned subsidiary of LMH for repairs and maintenance services to LMH properties. HMS has also provided planned work during the year including environmental projects. In accordance with the requirements of the Accounting Direction for Private Registered Providers of Social Housing, transactions between LMH and HMS, LMHD and ComMutual (which is not registered by the Homes and Communities Agency) were as per Note 15.


90


33. Financial assets and liabilities

The board policy on financial instruments is explained in the Board Report as are references to financial risks.

Categories of financial assets and financial liabilities

2017£’000

2016£’000

Cash at bank 40,954 37,055Financial assets that are equity instruments measured at costless impairment

3,050 2,800

Financial liabilities measured at amortised cost (125,633) (119,203)(81,629) (79,348)

Financial assets

Other than short-term debtors, financial assets held are equity instruments in other equities, cash at bank. They are Sterling denominated and the interest rate profile at 31 March 2017 was:

2017 £’000

2016£’000

Cash at bank 40,954 37,055Financial assets on which no interest is earned 3,050 2,800

44,004 39,855

The financial assets on which no interest is earned comprise of equity investment in theassociation’s subsidiaries. The remaining financial assets are floating rate, attracting interest atrates that vary with bank rates.

Financial liabilities excluding trade creditors – interest rate risk profile

The Group’s financial liabilities are Sterling denominated. The interest rate profile of the Group’s financial liabilities at 31 March 2017 was:

2017£’000

2016£’000

Floating rate 10,000 10,000Fixed rate 110,000 110,000

120,000 120,000

The debt maturity profile is shown in note 24.


91


34. Prior year adjustments

The Association has restated the comparative prior year amounts for a change in the treatment of gift aid receipts. The receipts should be treated as a distribution with the recognition being in the year of receipt and not in the year it was generated. A tax liability is recorded in the current year but will be mitigated by the gift aid receipt in the following year.

Restated consolidated statement of financial position

2016 £’000

Original reserves 248,654 Opening balance adjustment for 2015 tax liability (448) Reversal of 2015 tax liability 448 2016 tax liability (480)

248,174

Restated Association statement of financial position

2016 £’000

Original reserves 249,046 Opening balance adjustment for 2015 gift aid receipt (2,238) 2015 gift aid received in 2016 2,238 Reversal of 2016 gift aid receipt (2,407)

246,639

Restated consolidated surplus for the year ended 31 March 2016

2016 £’000

Original surplus 18,228 Reversal of 2015 tax liability 448 2016 tax liability (480)

18,196


92


35. Post balance sheet events

In July 2017, LMH Group re-structured its existing syndicate loan portfolio, retaining the existing finance but switching to a bi-lateral loan arrangement. This has enabled the Group to releasesecurity for further lending via the bond market in the short term.

The debt profile from 10 July 2017 will be:

Loans with Barclays Bank plc

Loan Amount Maturity Date Interest Rate£12.5 million October 2022 6.77% - 7.62%£12.5 million October 2026 6.16% - 7.01%£12.5 million October 2030 6.08% - 6.93%£10.0 million October 2034 5.99% - 6.84%£7.5 million December 2033 5.73% - 6.58%

£10.0 million revolving credit facility with an interest rate of LIBOR+1.25%

Loans with Royal Bank of Scotland plc

Loan Amount Maturity Date Interest Rate£12.5 million October 2022 7.72%£12.5 million October 2026 7.06%£12.5 million October 2030 6.98%£10.0 million October 2034 6.89%£7.5 million December 2033 6.62%

£10.0 million revolving credit facility with an interest rate of LIBOR+1.35%

LIVERPOOL MUTUAL HOMES LIMITED - LMH Group MUTUAL HOMES LIMITED Year ended 31 March 2017 5 Name LMH...

Documents

Transcript of LIVERPOOL MUTUAL HOMES LIMITED - LMH Group MUTUAL HOMES LIMITED Year ended 31 March 2017 5 Name LMH...