year ended 31 march 2017 financial statements · 2017-09-22 · 40 retail units, a block of 12...
TRANSCRIPT
Year ended 31 March 2017
Financial Statements
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Contents
Administrative Details .............................................................................................3-5
Strategic Report ........................................................................................................6-11
Board Report .............................................................................................................12-16
Independent Auditor’s Report to the Members ................................................17-18
Statement of Comprehensive Income ................................................................19
Statement of Financial Position ............................................................................20
Statement of Changes in Reserves .......................................................................21
Statement of Cash Flows ........................................................................................22
Notes to the Financial Statements .......................................................................23-53
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Administrative Details
Board Members to 1 May 2016
Council Board Members: Bill Smith Howard Barrett Tom Lewis Chris Barry Tenant Board Members: Frances Bevan (Vice Chair) Kevin Eddy Tracey Powell Marlene Burns
Independent Board Members: Nicola Evans (Chair) David Lewis Martin Jones Stephanie Howarth Co-optee: John Chown
Board Members from 1 May 2016
Independent Board Members: Nicola Evans (Chair) John Chown (Deputy Chair) David Lewis Martin Jones – resigned 29 September 2016 Stephanie Howarth Carol James Marc Fury Elizabeth Lendering
Executive Officers: Michael Owen (Chief Executive) Lorraine Oates (Director of Finance and Resources) Victoria Slade (Director of Housing) Paul Allen (Director of Asset Management)
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Administrative Details (cont.) Democratic Body from 1 May 2016:
Keith Edwards (Chair) – appointed 1 May 2016 – resigned 8 December 2016
Tenant Members: Frances Bevan – appointed 1 May 2016 – appointed Chair on 8 December 2016 Kevin Eddy – appointed 1 May 2016 – resigned 15 May 2017 Tracey Powell – appointed 1 May 2016 Marlene Burns – appointed 1 May 2016 Kim Ford – appointed 1 May 2016 Graham Walmsley – appointed 1 May 2016 Gaynor Bradley – appointed 1 May 2016 Joan Marshall – appointed 1 May 2016 Val Lloyd – appointed 1 May 2016 Lyndon Humphries – appointed 1 May 2016 Nigel Phillips-Gunter – appointed 1 May 2016
Employee Members: Natalie Ryan – appointed 1 May 2016 – appointed Deputy Chair on 2 February 2017 Mansell Mason – appointed 1 May 2016 Ceri Price – appointed 1 May 2016 Stephen Puddy – appointed 1 May 2016 Chris Kinsey – appointed 1 May 2016 – resigned 17 March 2017 Robert Davenport – appointed 1 May 2016 Chris Cooksey – appointed 1 May 2016 KevinClifford– appointed 1 May 2016
Council Members: Bill Smith – appointed 1 May 2016 Julian Pike – appointed 1 May 2016 Registered Office: Martin Evans House Riverside Court Avenue de Clichy MerthyrTydfil CF47 8LD
Area Office: Johnny Owen Centre Forsythia Close MerthyrTydfil CF47 9DS
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Administrative Details (cont.)
Independent Auditor: Mazars LLP Chartered Accountants 45 Church Street Birmingham B3 2RT
Internal Auditors: Barcud Shared Services Valleys to Coast Ltd Tremains Business Park Tremains Road Bridgend CF31 1TZ
Solicitors: Trowers and Hamlins LLP Sceptre Court 40 Tower Hill London EC3N 4DX
Bankers: National Westminster Bank Plc Heads of the Valleys Branch 122 High Street MerthyrTydfil CF47 8BN
Funders: The Royal Bank of Scotland plc Global Banking and Markets Housing Finance 7th Floor 135 Bishopsgate London EC2 3UR
Principality Building Society PO Box 89 Principality Buildings Queen Street Cardiff CF10 1UA
Merthyr Valleys Homes Limited is a registered society under the Co-operative andCommunityBenefitSocietiesAct2014.Registrationnumber30532R.Registered with the Welsh Government as a Registered Social Landlord. Registration number L150
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Legal StatusMVH is established and registered under theCo-operativeandCommunityBenefitSocieties Act 2014 and is a Registered Social Landlord, registered with the Welsh Government. MVH has adopted charitable rules.MVHisanot-for-profitmutualorganisation administered by a voluntary Board of Management.
Principal activities and objectivesMVH owns, manages and maintains 4,160 rented homes, including 206 units of sheltered accommodation, located within theCountyBoroughofMerthyrTydfil.MVH also owns or manages 628 garages, 40 retail units, a block of 12 co-operative housingflatswhichareleasedtoTafFechan Housing Co-operative Ltd and 283 leasehold properties.
In line with our transition to a mutual organisation during 2016/17, our Corporate Strategy was reviewed and our new strategy ‘Yfory’ was adopted.
For us, Yfory will bring: •Prideinthecommunitieswelivein •Prideintheorganisationthatweown
and work for •Greateropportunitiesforeachofusto
take responsibility
To ensure that Yfory can be achieved, we needtoremainfinanciallystrong.
Our key objectives are:
Communities
•Wewanttoimprovealltheopenplangreen areas.
• Wewantallourhomestobesafe,energyefficientandlookgoodfromtheinsideand out.
• Wewillremaintheanchorinvestorandin all areas we will encourage inward investment.
• Wewanttoprovidethegreatestopportunities for our community.
• Wewantallmembersofourcommunityto feel valued, safe and supported.
• Wewanttoprovideahousingsolutionforyoung people.
• Wewanttobuildthetypeofhousesourcommunity needs.
Organisation
• Weareamutualandwewillworktogether to achieve our aims.
• Wewilllivethemutualprinciplesintheway we operate.
• Wewillactdemocraticallyandbeaccountable to our members.
• Wewillhaveaskilledandwelltrainedworkforce to deliver the services our members need.
• Wewillusetechnologytobuildbetterservices and stronger relations.
• Wewillremainamajoremployerintheborough setting and encouraging others to adopt the highest standards.
Strategic Report
Year ended 31 March 2017
The Board present their Strategic Report on the affairs of Merthyr Valleys Homes Limited (MVH), together with the financial statements and auditor’s report, for the year ended 31 March 2017.
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Strategic Report
Year ended 31 March 2017
Responsibility
•Wewanttobethebest.•Wewanttoprovidesupportand
information to our members to empower them.
•Wewanttoshareskillsandlearningbetween members.
•Wewilltakeresponsibilitytocommunicateeffectivelyandalwaysseekpositiveoutcomes for our tenants.
•Wewillsupportotherstoreachtheirfullpotential through grants and support.
Financial PerformanceThe 2016/17 Financial Statements have been prepared under FRS102, the Financial Reporting Standard applicable in the United Kingdom and Ireland (‘FRS102’), the Housing Statement of Recommended Practice – Housing SORP 2014, Statement of Recommended Practice for Registered Social Housing Providers (‘SORP 2014’) and the Accounting Requirements for Registered Social Landlords General Determination (Wales) 2015.
Statement of Comprehensive IncomeThefinancialresultfortheyearended31March 2017 was an operating surplus of £3.229m, an increase of £0.953m. Our operating margin increased from 13% to 18%, with increased turnover of £0.756m to £18.437m (4%) and a 1% reduction in operating expenditure compared to the previous year. Rental income is the largest income stream, representing 89% of turnover andtheincreaseinrentalincomereflectstheagreed 2.5% guideline rent increase issued by the Welsh Government. Income from the sale of Right to Buy properties fell in the year, with 14 sales in 2016/17 compared to 24 in the previous year.
Bad Debts and Void LossBad debts and voids as a percentage of gross rent receivable fell by 1.2% in 2017. The reduction in void losses is a result of the continued investment made in turning around void properties which, at 31st March 2017, were at 32, the lowest since transfer.
Rent ArrearsThe cumulative rent arrears (current and former) fell by £0.034m, from £0.66m at 1st April 2016 to £0.626m at 31 March 2017. Current arrears fell by £0.041m, from £0.464m at 1st April 2016 to £0.423m at 31 March 2017. Former tenant arrears increased by £0.007m from £0.196m at 1st April 2016 to £0.203m at 31 March 2017 however the bad debt provision provides for 100% of this debt as soon as it arises.
Fixed AssetsThe net book value of our housing stock was £55.598m at 31 March 2017. We invested £6.749m in capital improvements during theyearandthiswasoffsetby£3.125mofdepreciation charges. A combination of internal cash balances and grant income from the Welsh Government has been used to fund the capital programme.
Animpairmentoffixedassetshasbeenmade at 31 March 2017 relating to 8 of our properties which will be demolished during 2017/18.
Total grant income was made up of Dowry Gap Funding of £2.9m, £0.068m Social Housing Grant funding for the development of 3 new properties at Haydn Terrace and a £0.052m Independent Care Funding (ICF) grant to adapt 2 disabled properties. An independent valuation of the housing stock conducted by Savills based on Existing Use Value including 2 years of Dowry Gap Funding shows an increase in value to £87.775m as at 31 March 2017.
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Strategic Report
Year ended 31 March 2017
Our investment properties were valued at £0.897m at 31 March 2017.
Loans No new loans were drawn during the year from our lenders (RBS and Principality). Our loan balance at 31 March 2017 was £24m. Of this,£20mwasatfixedinterestratesand£4mat variable rates. Interest payable on our loans increased marginally by 0.6% to £1.865m.
The balance of our loan provided by Merthyr TydfilCountyBoroughCouncil(MTCBC)in 2014/15 to fund the renovations of Taf Fechan House and to create a new Housing Co-operative was £0.469m at 31 March 2017.
Pension Fund AssetThe pension fund asset is based on the Actuary’s valuation as at 31 March 2017. The balance sheet shows a decrease in the value of the pension fund asset of £1.095m to £3.765m. 2016/17’s employer’s pension contribution rate was 6.4%, compared to 8.4% in 2015/16 and the latest triennial valuation as at 31 March 2016 has determined that our contribution rates will remain at 6.4% in 2017/18, rising over the following two years up to 10.7% in 2019/20. This is a positive position to be in, with no additional annual coststofundaschemedeficit.
Net AssetsThe overall net assets position at 31 March 2017 is £12.979m, compared to £11.520m at 31 March 2016. This is mainly due to the increase in the value of housing properties as a result of the major investment programme, offsetbyafallinthevalueofthePensionFund Asset.
MVH: Future developments Constructiononournewheadofficein Gellideg began during 2016/17 and is
scheduled to be completed in March 2018. ThisnewofficewillhelpregeneratethecentreoftheGellidegareaandwillforthefirsttimebring all our employees into one location.
2017/18 will also see the completion of our new CRM system which will improve our operating environment and ensure we continue to be customer focused.
Value for Money (VFM) Statement
MVH publishes a Value for Money Statement annually. We measure this through our 10 Golden Rules. The Democratic Body has approved the 2016/17 VfM Statement on behalf of the Members, concluding that MVH has provided Value for Money during 2016/17.
Key Performance Indicators (KPIs) 2016/17Merthyr Valleys Homes reported the following Key Performance Indicators for 2016/17.
KPI2016/17 Target
2016/17 Actual
Current Tenant Arrears 2016/17
2.5% 2.45%
Empty Home Rent Loss Percentage
2% 0.89%
Average Time Taken to Complete Emergency Repairs in days
0.5 0.18
Average Time Taken to Complete Urgent Repairs in days
5 2.21
Average Time Taken to Complete Routine Repairs in days
28 51.24
Percentage of Properties with a Valid Landlord Gas Safety Record
100% 100%
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Year ended 31 March 2017Strategic Report
Rent arrears for 2016/17ThisKPIhasbeenrecalibratedtoreflectourarrears position more accurately. We now recognise a higher level of prepayments. Applying this calculation to last year’s results the performance has actually improved year on year. All income management KPIs have operated within target and whilst trendshavefluctuatedslightlyoverthelast few years, in the current climate, this performance is very pleasing.
Empty Home Rent Loss PercentageThe strategic investment made in 2015/16 to reduce void numbers has yielded low rent loss from empty properties in 2016/17, going from 2% down to 0.89% year on year. Overall repairs expenditure on empty properties has been within budget. Year end empty property numbers were just 32, less than 1% of our properties. Reducing empty home rent loss was a strategic target for 2016/17 and it will continue to be a focus into 2017/18 and beyond. Average turnaround times also improved year on year from 72 days down to 42.52 days in 2016/17.
Average Time Taken to CompleteEmergency RepairsWe completed 99.75% of all emergency repairs and our average time taken was just 0.18 days. This has been our best ever performance. The number of jobs recorded as emergencies has also reduced and we are now more in line with the Sector. Average Time Taken to Complete UrgentRepairsWe achieved 99.16% of jobs carried out within target time at an average of 2.21 days in 2016/17, compared to 97.25% of jobs in 2015/16. This result is pleasing and shows improving performance year on year.
Average Time Taken to CompleteRoutine RepairsThisKPIhasbeenadverselyaffectedbytheinclusion of planned work. We will address this in 2017/18.
Percentage of properties with a validlandlord gas safety recordWe have once again achieved a 100% record on this indicator.
Risk Management
MVH faces a wide range of business risks. We manage and mitigate these risks using our Risk Management Policy and Strategy. The Board has overall responsibility for risk management and receives a bi-annual report on risk. The Board has delegated the task of monitoring risk to the Audit Committee.
The Risk Management Policy and Strategy is the framework for managing strategic riskswhichcouldaffectthedeliveryofour Corporate objectives. The Welsh Government’s Sector-Wide Risks have been considered and included, where appropriate. Risk is reviewed every quarter by the Senior and Executive Management Teams. The Audit Committee monitors how well risk is managed at each of their meetings, they also determine the risk appetite for each strategic risk. Where a strategic risk is reviewed and is found not to be within our risk appetite, action will be taken to either put further controls and mitigations in place, or to seek further assurance that the identifiedcontrolsareoperatingeffectively.Our internal auditors perform an annual review of our risk management processes.
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Year ended 31 March 2017Strategic Report
Our top 6 risks are:-1.WelfareBenefitreforms.2. Community decline/Low demand for
housing.3. Potential insurance liability claims.4.Differentialincostsandincome.5. Data Protection.6. Quality of our steel framed (BISF)
properties.
Treasury Management
MVH operates a Treasury Management Policy which underpins the annual Treasury Management Strategy and is based around four key principles:-•Compliancewithstatute,regulation&best
practice.•Securityoffinancialassets.•Liquidity.•Effectiveness&Efficiencyintheuseoffinancialresourcesandachievingvalueformoney.
The Treasury Management Strategy is reviewed and updated annually by our external advisors – Capita Asset Services. This is approved annually by the Board. The Board receives a bi-annual report on treasury management performance.
Financial risk managementMVH’s activities expose it to a number of financialrisksi.e.liquidity,cashflowandcredit risk:
Liquidity riskMVH uses a combination of long term andshorttermdebtfinancetomaintainliquidity,ensuringthatsufficientfundsareavailable for ongoing operations and future developments. MVH holds cash, short term investments and has access to grants and a £40m loan facility.
MVH has two main sources of capital funding:-1. £40m loan facility from the Royal Bank of
Scotland (RBS) and Principality Building Society. This comprises £32m from RBS and £8m from Principality BS and is divided into two Tranches, A and B. Tranche A provides £24m and is fully drawn and Tranche B £16m. Tranche B is a revolving facility provided solely by RBS, meaning that it can be drawn and repaid. Tranche B will convert to a “term” loan from 31 March 2023. All borrowings to date have been drawn from Tranche A and therefore cannot be repaid until after we have reached peak debt in 2018/19. At 31 March 2017, our borrowing remained at £24m with no loans drawn down during the year. This was mainly due to additional income received from Right to Buy sales during the year. The repayment of the loan facility is due by 31 March 2034 however our latest forecast indicates that we will repay by 31 March 2032.
2. £2.9m Dowry Gap Funding from the Welsh Government which is received on an annual basis and there is an expectation that it will continue to be received until 2036/37.
Peak debt of £30.613m is expected to occur in 2018/19 which means that we have spare capacity of approximately £9m on our loan facility. This will be a useful way to fund our future new build plans, with lenders’ approval.
In 2014 we took out a 25 year loan from MTCBC for £510,000 at an all-in interest rate of 2.92%. The outstanding balance on this loan is £469,000 at 31 March 2017. This loan will be repaid via a long term lease agreement with Taf Fechan Housing Co-operative.
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Year ended 31 March 2017Strategic Report
Cash flow riskThreeforwardfixedrateagreementswereput in place on transfer to hedge against adverse movements in interest rates. Two ofthesehavebeenexecutedandthefinalforwardfixedrateagreementisinplacefrom 1 April 2020. The loans drawn at 31 March 2017 of £24m consist of £20m at fixedinterestratesand£4matvariablerates.
Our Treasury Management Policy and Strategy set out parameters for the ratio of fixedtovariablerateborrowingofbetween60-80%atfixedratestogiveuscertaintyover our costs. At 31 March 2017 the ratio offixedtovariablerateborrowingwas84%oftotal loans outstanding. Board has approvedthe deviation from policy at the end ofMarch2017.Theproportionoffixedratedebt is projected to be between 60% and80% until 2023.
Credit riskMVH’sprincipalfinancialassetsarebankbalances and cash, rent arrears and other receivables and investments.
Our credit risk is primarily attributable to rent arrears. The amounts presented in the Statement of Financial Position are net of allowances for bad debts. The credit risk on our investments is limited because the counterparties are banks with credit ratings that fall in line with our Treasury Management Policy.
Key Accounting PoliciesThe key accounting policies are set out in Note 2 of the Financial Statements on pages 23-30.
Going ConcernThe Board has a reasonable expectation that MVH has adequate resources to continue in operational existence for the foreseeable
future. For this reason they continue to adopt the going concern basis in preparing thefinancialstatements.
Reserves StrategyMVH has a Use of Capital Receipts Policy which sets out how and when capital receipts can be used. The priority for the use of capital receipts is to:• Managecashflow• Increasecapitalspendingonstock
reinvestment• Purchasepropertiesthroughatargeted
buy back scheme• Financedevelopmentschemes,with
Funders approval.
Any cash reserves at year end will be retained and carried forward into the following year. It is not until we reach peak debt that we are able to repay our loans.
Nicola Evans – ChairDate: 21 September 2017
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The Board are pleased to present their report and audited financial statements for Merthyr Valleys Homes Limited (MVH) for the year ended 31 March 2017.
Principal ActivitiesMVHisanot-for-profitmutualorganisationadministered by a voluntary Board. MVH operates in the MTCBC local authority area. MVH’s principal activities are the management and improvement of social housing.
Performance for the YearThe Board reports a surplus of £1.975m. During the year MVH spent £15.05m on reactive, void and cyclical repairs and the capitalprogramme.Thiswasfinancedfrominternalfinancingi.e.rentalincome;incomefromthesaleofassets;DowryGapFundingand other grants.
Net Assets at 31 March 2017 were £12.979m. As at 31 March 2017 the restricted reserves for the Pension Fund Asset and the Big Lottery Fund were £3.765m and £1,000 respectively.
GovernanceThe Board is responsible for managing theaffairsofMVH.BoardMembersandSeniorOfficersarelistedonpage3underAdministrative Details. The Board Members haveheldofficeduring2016/17unlessotherwise stated. Prior to 1 May 2016, the Board comprised 12 members, 4 of which were tenant board members, 4 independent members and 4 Councillors. There was also 1 co-opted member.
On 1 May 2016, our legal structure changed andMVHbecameWales’firsttenantandemployee mutual housing association, allowing tenants and employees to become members. The Mutual has two tiers of
governance:• ADemocraticBodymadeupof21
member representatives:a) Tenant representatives elected by
tenantmembers;b) Staffrepresentativeselectedbystaff
members;c) RepresentationfromMTCBC;d) Representation from local community
organisations – these would be co-optedpositionsasandwhenrequired;
e) The Rules also allow for the DemocraticBody to appoint an independent Chairif required.
• ABoardof8NonExecutiveDirectorswiththe relevant skills and experience who havebeen appointed by the Democratic Body torun the mutual on their behalf.
There was one Board member and one Democratic Body vacancy at 31 March 2017.
Each of the two parts of the governance structure has key areas of responsibility set out in the Rules and Governance Framework.
The Board has a legal responsibility for the overallcontroloftheaffairsofthemutual.The Democratic Body is responsible for representing members and the wider interestsof the community through agreeing a strategic framework for the Board to operate within and by holding the Non-Executive Directors accountable.
MVH also has an Audit Committee, with membership drawn from the Board and Democratic Body.
Board Report Year ended 31 March 2017
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Board Report Year ended 31 March 2017
TheExecutiveOfficershavenolegalstatusas directors, although they act as executives within authority delegated by the Board. MVH has insurance policies indemnifying its Board MembersandExecutiveOfficersagainstliability when acting on behalf of the mutual.
Democratic BodyThe Democratic Body forms part of MVH’s governance structure along with the Board and is the elected body which represents members and the wider community in MVH’s decision making process.
The Democratic Body met 6 times during 2016/17 and held 1 joint session with the Board. The Democratic Body’s responsibilitiesinclude;• AppointingandremovingtheChairof
the Board of Directors and other Non-Executive Directors
• ToworkwithandsupporttheBoardof Directors and Chief Executive indeveloping the mutual’s Business Plan
• Toapprovethemutual’scorporateplan,policy framework and programme ofinternal audit
• Tomonitortheperformanceofthemutual and the Board of Directorsagainst the corporate strategy
During 2016/17 it made the following critical decisions;• Appointmentof3Non-ExecutiveDirectors• DevelopmentofCorporatePlan‘Yfory’• JointdecisionwiththeBoardonrent
setting• Influencedthecapitalprogrammeworks• DevelopmentofaMembershipStrategy
A full list of the functions of the Democratic Body are detailed within the MVH rules available at www.mvhomes.org.uk
MVH MembershipMembers are separated into two constituencies: tenants and employees. Members have access to information, a voice in the mutual and an opportunity to play a representative role in its governance.
No. %
Tenants 904 84.9%
Employees 161 15.1%
EmployeesThe number of employees at 31 March 2017 was 191. MVH’s ability to meet its objectives and commitments to tenants in anefficientandeffectivemannerdependson the contribution of all its employees. MVH recognises and values diversity and is committed to strengthening community cohesion. MVH seeks to provide equal opportunities in employment by adhering to our Equal Opportunities Policy.
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Board Report Year ended 31 March 2017
Charitable DonationsMVH made £18,982 in charitable donations during the year which were approved by the Grants and Sponsorship Panel. This included the following donations:-
£
Friends Of The Peoples Kitchen 641
Dowlais Male Voice Choir 3,000
Troedyrhiw Bowls Club 585
MerthyrTydfilAssociationFootballLeague
273
PenydarrenBoys&GirlsClub 2,302
Cefn Coed RFC Ltd 1,526
Pontsticill Community Group 2,190
MerthyrTydfilShotokanKarateAcademy
1,240
Dowlais&DistrictChrysanthemumSociety
785
Cyfarthfa Gardening Group 1,440
Forsythia Youth Project 5,000
Statement of Internal Control
In accordance with the Welsh Government Circular RSL 02/10 Internal Controls and Reporting, the Board acknowledges its responsibilities for the systems of internal controlandreviewingtheireffectiveness.The Board also acknowledges its responsibilityfor the wider aspects of risk. The Audit CommitteereviewstheeffectivenessofMVH’s internal controls on an on-going basis and ensures that all necessary actions aretakentoremedyanysignificantfailingsorweaknesseswhichmaybeidentified.
The mutual’s systems are designed to provide reasonable but not absolute assurance regarding:-• Thesafeguardingofassets.• Themaintenanceofproperaccounting
records.
• Thereliabilityoffinancialinformation.• Themanagementofriskswhichcouldadverselyaffectthemutual’sabilitytoachieve its corporate objectives (YFory).
The following mechanisms constitute the key elements of the framework designed and implemented by management to provideeffectiveinternalcontrol:-• StandingOrdersandFinancialRegulations
which sets out the Scheme of Delegation.• ContractStandingOrderssettingoutthe
framework for the procurement of goods and services.
• Clearlydefinedcorporateanddivisionalmanagement responsibilities and reportingstructures.
• Suitablyexperiencedandqualifiedstaffmembers.
• Formalpoliciesandproceduresadoptedby the Board and Democratic Body andunderstoodbystaff.
• Comprehensivesystemsoffinancialreporting including annual budgets andquarterly management accounts reportedto the Board, detailing actual performanceagainst budget.
• Regularmonitoringofloancovenants.• ARiskManagementFrameworkthatis
regularly reviewed and evaluated by theBoard and Audit Committee.
• Arangeofanti-fraudpolicies,includinganti-bribery and anti money-launderingwhichareunderstoodbystaff.AFraudRegister is maintained and reviewed by theAudit Committee at each meeting.
• Boardauthorisationofmajorcontractswhich could pose a risk to the organisation.
• Arobustinternalauditservicewhichreports to Audit Committee regularly.
• Athirtyyearfinancialbusinessplanthatisupdated and approved annually and is alsousedformediumtermfinancialplanning.
• AProcurementStrategysettingouthowMVH will conduct procurement activities.
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Board Report Year ended 31 March 2017
• AnnualDeclarationsofInterestreturnsfrom all Board members, Democratic Bodyrepresentativesandstaff.
• AGiftsandHospitalityRegisterwhichisreviewed by the Audit Committee at eachmeeting.
• ASchedule1Registerismaintainedandall entries are reported to the Board by theCompany Secretary.
The Audit Committee has reviewed the effectivenessofMVH’sinternalcontrolsduring the year. No weaknesses were foundthat resulted in material losses, contingenciesor uncertainties which require disclosure in the Financial Statements or in the Auditor’s Report and the Board are not aware of any such weaknesses from 1 April 2017 to date.
Statement of Board Members’ ResponsibilitiesThe Board are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
TheCo-operativeandCommunityBenefitSocieties Act 2014 and Housing Association legislation requires the Board to prepare financialstatementsforeachfinancialyear. Under that legislation the Board have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) – FRS102, the Financial Reporting Standard applicable in the United Kingdom and Ireland.
Under Housing Association legislation the Board must not approve the Financial StatementsunlesstheyaresatisfiedthattheygiveatrueandfairviewofthestateofaffairsofMVHandofthesurplusordeficitofMVH
for that period. In preparing these Financial Statements the Board are required to:• Selectsuitableaccountingpolicies,and
apply them consistently.• Makejudgmentsandaccountingestimates
that are reasonable and prudent.• StatewhetherapplicableUKAccounting
Standards have been followed, subjectto any material departures disclosed andexplainedinthefinancialstatements.
• Preparethefinancialstatementsonthe going concern basis unless it isinappropriate to presume that MVH willcontinue in business.
The Board are responsible for keeping adequate accounting records that are sufficienttoshowandexplainMVH’stransactions and disclose with reasonable accuracyatanytimethefinancialpositionof MVH and enable them to ensure that the Financial Statements comply with Housing Association legislation. They are also responsible for safeguarding the assets of MVH and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Board are responsible for the maintenance and integrity of the corporate andfinancialinformationincludedonMVH’swebsite. Legislation in the United Kingdom governing the preparation and dissemination offinancialstatementsmaydifferfromlegislation in other jurisdictions.
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Board Report Year ended 31 March 2017
Disclosure of information to the AuditorEach of the Board Members at the date of approvalofthisreporthasconfirmedthat:• AsfarastheBoardmembersareaware,
there is no relevant audit information ofwhich the mutual’s auditor is unaware.
• TheBoardMembershavetakenallthesteps that they ought to have takenas Board Members in order to makethemselves aware of any relevant auditinformation and to establish that theauditor is aware of that information.
Annual Members MeetingThe Annual Members Meeting will be held on 21 September 2017 at Afon Taf High School. At this meeting, MVH’s 2016/17 Financial Statements will be presented for adoption.
AuditorThe External Audit service will be subject to a tendering process during 2017/18 and an appointment then made.
By order of the Board Nicola Evans – ChairDate: 21 September 2017
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Respective responsibilities of The Board and auditorAs explained more fully in the Statement of the Board’s Responsibilities set out on page 15, the Board is responsible for the preparationofthefinancialstatementsandforbeingsatisfiedthattheygiveatrueandfair view.
Our responsibility is to audit and express anopiniononthefinancialstatementsin accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report is made solely to the entity’s members, as a body, in accordance with Part 7 of theCo-operativeandCommunityBenefitSocieties Act 2014 and the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to the entity’s members those matters we are required to state to them in an auditor’s
Independent auditor’s report to the members of Merthyr Valleys Homes Limited Year ended 31 March 2017
Wehaveauditedthefinancialstatementsof Merthyr Valleys Homes Limited for the year ended 31st March 2017 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Reserves, the Statement of Cash Flows, and the related notes.Thefinancialreportingframeworkthat has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the entity and its members as a body for our audit work, for this report, or for the opinions we have formed.
We have reviewed the Board’s statement on the entity’s compliance with the Welsh Government circular RSL 02/10 ‘Internal controls and reporting’. We are not required toexpressanopinionontheeffectivenessofthe entity‘s system of internal control.
Scope of the audit of the financial statementsA description of the scope of an audit of financialstatementsisprovidedontheFinancial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on the financial statementsInouropinionthefinancialstatements:• giveatrueandfairviewofthestateoftheentity’saffairsasat31stMarch2017andoftheentity’ssurplusfortheyearthenended;
• havebeenproperlypreparedinaccordance with United KingdomGenerallyAcceptedAccountingPractice;and
• havebeenpreparedinaccordancewiththe requirements of the Co-operativeandCommunityBenefitSocietiesAct2014, the Housing and Regeneration Act2008 and the Accounting Requirementsfor Registered Social Landlords GeneralDetermination (Wales) 2015.
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Independent auditor’s report to the members of Merthyr Valleys Homes LimitedYear ended 31 March 2017
Opinion on other matters prescribed by the Welsh Government circular RSL 02/10 ‘Internal controls and reporting’In our opinion, with respect to the Board’s statement on internal control:• theBoardhasprovidedthedisclosures
required by the Welsh Government circularRSL02/10‘Internalcontrolsandreporting’;and
• thestatementisnotinconsistentwiththeinformation of which we are aware fromourauditworkonthefinancialstatements.
Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Co-operative andCommunityBenefitSocietiesAct2014 requires us to report to you if, in our opinion;• theentityhasnotkeptproperbooksofaccount;or
• asatisfactorysystemofcontrolovertransactionshasnotbeenmaintained;or
• thefinancialstatementsarenotinagreementwiththebooksofaccount;or
• wehavenotreceivedalltheinformationand explanations we require for our audit.
Mazars LLPChartered Accountants and Statutory Auditor 45 Church StreetBirminghamB3 2RT
Date:
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19
Continuing OperationsAll transactions during the period are derived from continuing activities.
Statement of Comprehensive Income Year Ended 31 March 2017
TurnoverOperating expenditure
Operating SurplusSurplus on disposal of property, plant and equipmentInterest receivableInterestandfinancingcostsChangeinfairvalueoffinancialinstruments
Surplus before tax
Taxation
Surplus for the year
Actuarial (loss) / gain in respect of pension schemes
Total comprehensive income for the year
Notes
44
567821
2(n)
31
2017£’000
18,437(15,208)
3,229418193
(1,865) -
1,975
-
1,975
(516)
1,459
2016£’000
17,681(15,405)
2,276886140
(1,854)1,214
2,662
-
2,662
1,879
4,541
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Statement of Financial Position At 31 March 2017
Fixed AssetsIntangible assetsProperty, Plant and Equipment
– Housing properties– Other property plant and equipment
Investment properties
Current AssetsInventoriesDebtors
– Amounts falling due within one year– Amounts falling due after one year
Cash and cash equivalents
Creditors: amounts falling due within one yearDowry funding and other government grants: amountsfalling due within one yearNet current assets excluding pension assetPension assetNet current assets including pension assetTotal assets less current liabilitiesCreditors: amounts falling due after more than one yearDowry funding and other government grants: amountsfalling due after more than one yearProvisions for liabilitiesNet Assets
Capital and ReservesShare capitalRevenue reservesRestricted reserves
Notes
11
121415
16
171827
19
22
31
20
2229
23
24
2017£’000
744
55,5981,709
89758,948
15
99564,976
2,06168,047(3,340)
(1,513)63,194
3,76566,959
125,907(24,727)
(23,225)(64,976)
12,979
-9,2133,766
12,979
2016£’000
502
52,346930897
54,675
12
1,06771,5922,214
74,885(3,236)
(1,443)70,2064,860
75,066129,741(24,664)
(21,745)(71,812)11,520
-6,6584,862
11,520
The Financial Statements on pages 19 to 53 were approved and authorised for issue by Board of Management on 21 September 2017 and were signed on its behalf:
Chair of the Board Vice Chair Company Secretary(Nicola Evans) (John Chown) (Allison Soroko)
Company registration no: 30532R
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Statement of Changes in ReservesYear ended 31 March 2017
At 1 April 2015Surplus for the yearActuarial gain in respect of pension schemesTransfer between reservesAt 31 March 2016
At 1 April 2016Surplus for the yearActuarial loss in respect of pension schemesTransfer between reservesAt 31 March 2017
Notes
3124
3124
Revenuereserves
£’0003,4412,662
-555
6,658
£’0006,6581,975
-580
9,213
Restrictedreserves
£’0003,538
-1,879(555)
4,862
£’0004,862
-(516)(580)3,766
Total£’0006,9792,6621,879
-11,520
£’00011,520
1,975(516)
-12,979
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Statement of Cash FlowsYear ended 31 March 2017
Net cash generated from operating activities
Cash flows from investing activitiesPurchase of property, plant and equipmentPurchaseofotherfixedassetsProceeds from sale of property, plant and equipmentGrants receivedInterest receivedNet cash flows from investing activities
Cash flows from financing activitiesInterest paidInterestelementoffinanceleaserentalpaymentsRepayment of borrowingsCapitalelementoffinanceleaserentalpaymentsRevenue loan arrangementNet cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Free cash flow for the year end 31 March
Net cash generated from operating activities
Interest paidInterest receivedAdjustments for reinvestment in existing properties:Component replacementsPurchaseofotherreplacementfixedassetsComponent replacement grant receivedFree cash consumed before loan repaymentsLoans repaid (excluding revolving credit and overdrafts)Free cash consumed after loan repayments
Note27
2017£’0005,948
(6,425)(1,138)
4182,953
16(4,176)
(1,849)(14)(21)(75)34
(1,925)
(153)
2,214
2,061
2017£’0005,948
(1,815)16
(6,336)(1,138)2,952(373)
(21)(394)
2016£’0004,766
(8,097)(519)886
2,92818
(4,784)
(1,638)(8)
(20)(138)
34(1,770)
(1,788)
4,002
2,214
2016£’0004,766
(1,604)18
(7,303)(519)
2,900(1,742)
(20)(1,762)
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Notes to the Financial Statements Year ended 31 March 2017
1) a) General informationThefinancialstatementsofMerthyrValleysHomes Limited (MVH) for the year ended31st March 2017 comprise the Statementof Comprehensive Income, the Statementof Financial Position, the Statement ofChanges in Reserves, the Statement of CashFlowsandtherelatednotes.Thefinancialstatements are presented in sterling (£).
b) Company information MVH is registered under the Co-operativeandCommunityBenefitSocietiesAct2014 and is a Registered Social Landlord,registered with the Welsh Government.MVH has adopted charitable rules. MVHis incorporated in the United Kingdom. ItsregisteredofficeisMartinEvansHouse,Riverside Court, Avenue de Clichy, MerthyrTydfil,CF478LD.
MVH owns, manages and maintains 4,160 rented homes, including 206 units of sheltered accommodation, located within theCountyBoroughofMerthyrTydfil.MVH also owns or manages 628 garages, 40 retail units, a block of 12 co-operative housingflatswhichareleasedtoTafFechan Housing Co-operative Ltd and 283 leasehold properties.
2) Accounting Policies The principal accounting policies aresummarised below. They have all beenapplied consistently throughout the yearand the preceding year.
a) Basis of accountingThefinancialstatementshavebeenprepared under the historical costconvention,modifiedtoincludecertainitems at fair value, in accordance with
Financial Reporting Standard 102 (FRS 102) issued by the Financial ReportingCouncil and comply with the Statementof Recommended Practice for RegisteredSocial Housing Providers 2014 (SORP),the Housing and Regeneration Act 2008and the Accounting Requirements forRegistered Social Landlords GeneralDetermination (Wales) 2015. MerthyrValleysHomesLimitedisapublicbenefitentity,asdefinedinFRS102andappliestherelevantparagraphsprefixed‘PBE’inFRS 102.
b) Intangible assets Intangible assets are stated at historiccost, less accumulated amortisation.Amortisation is provided on all intangibleassetsatratescalculatedtowriteoffthecost of each asset on a straight line basisover its expected useful life, as follows:
ComponentProjected Economic Life (years)
Computer software 5-8
c) Property, plant and equipment -housing properties Following the stock transfer on 30March 2009 the properties were valuedat £nil. Housing properties are statedat cost less accumulated depreciationand accumulated impairment losses.Cost includes the cost of acquiringland and buildings, directly attributabledevelopment costs and borrowing costsdirectly attributable to the constructionof new housing properties during thedevelopment. Directly attributable costscan include the labour costs of Merthyr
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Notes to the Financial Statements Year ended 31 March 2017
Valleys Homes’ in-house Property Services Team, materials and overhead costs.
Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete.
Depreciation is charged so as to write down the net book value of housing properties to their estimated residual value, on a straight line basis, over their useful economic lives. Freehold land is not depreciated. Properties in the course of construction are not depreciated.
Traditionally built properties are depreciated over 100 years. Non-traditionally built properties are depreciated over 50 years.
Major components Major components of housing properties, whichhavesignificantlydifferentpatternsofconsumptionofeconomicbenefits,aretreated as separate assets and depreciated over their expected useful economic lives at the following annual rates:
ComponentProjected Economic Life (years)
Roofs 50
Windows and Doors 30
Kitchens 15
Bathrooms 25
Heating Systems 15
Rewires 25
Building Structure (walls, retaining walls, paths etc)
50
Other 10-15
Properties held on long leases are depreciated over their estimated useful economic lives or the duration of the lease, if shorter.
Improvements Where there are improvements to housing properties that are expected to provide incrementalfuturebenefits,thesearecapitalised and added to the carrying amount of the property. Any works to housing properties which do not replace a component or result in an incremental futurebenefitarechargedasexpenditureinsurplusordeficitintheStatementofComprehensive Income. To increase an asset’s performance, expenditure must result in one or more of the following:-• Increasedrentalincome.• Areductioninfuturemaintenancecosts.• Asignificantextensiontotheusefullife
of the property.
Leaseholders Where the rights and obligations for improving a housing property reside with the leaseholder or tenant, any works to improve such properties incurred by MVH is recharged to the leaseholder and recognisedinsurplusordeficitintheStatement of Comprehensive Income along with the corresponding income from the leaseholder or tenant.
Timing of depreciation on housing properties The commencement of depreciation charged to the Statement of Comprehensive Income in respect of an asset is in the month of recognition of the completed asset.
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Notes to the Financial Statements Year ended 31 March 2017
d) Non-housing property, plant andequipment Non-housing property, plant andequipment is stated at historic costless accumulated depreciation and anyprovision for impairment. Depreciationis provided on all non-housing property,plant and equipment, other thaninvestment properties and freehold land,atratescalculatedtowriteoffthecostorvaluation, less estimated residual value, ofeach asset on a straight-line basis over itsexpected useful life, as follows:
ComponentProjected Economic Life (years)
OfficeImprovements 10
Furniture,fixturesandfittings
10
Telephone System 8
OfficeEquipment 5
Computer Implemention Hardware
5
Computer Hardware – Other
3
Scheme Equipment and Furniture
10-25
The re-life of an asset will only occur in exceptional circumstances where the asset’s useful economic life is known in advance to be reduced.
Timing of depreciation on non-housing property, plant and equipment
The commencement of depreciation charged to the Statement of Comprehensive Income in respect of an asset is in the month following the acquisition of that asset.
e) Investment propertiesTheclassificationofpropertiesasinvestment property or property plant andequipment is based upon the intendeduse of the property. Properties held toearn commercial rentals or for capitalappreciation,orboth,areclassifiedasinvestment properties. Properties that areused for administrative purposes or that areheld for the provision of social housing aretreated as property plant and equipment.Mixed use property is separated betweeninvestment property and property, plantand equipment.
Land is accounted for based on its intended use. Where land is acquired speculatively with the intention of generating a capital gain and/or a commercial rental return it is accounted for as investment property. Where land is acquired for use in the provision of social housing or for a social benefititisaccountedforasproperty,plantand equipment.
Investment properties are measured at fair value annually with any change recognised asasurplusordeficitintheStatementofComprehensive Income.
f) Impairment of social housingpropertiesPropertiesheldfortheirsocialbenefitarenotheldsolelyforthecashinflowstheygenerate and are held for their servicepotential.
An assessment is made at each reporting date as to whether an indicator of impairment exists. If such an indicator exists, an impairment assessment is carried out and an estimate of the recoverable amount of the asset is made.
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Notes to the Financial Statements Year ended 31 March 2017
Where the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised as asurplusordeficitintheStatementof Comprehensive Income. The recoverable amount of an asset is the higher of its value in use or fair value less costs to sell. Where assets are held for their service potential, value in use is determined by the present value of the asset’s remaining service potential plus the net amount expected to be received from its disposal. Depreciated replacement cost is taken as a suitable measurement model.
Merthyr Valleys Homes check annually for any indication of impairment by reference to:-• Trendsinvoidsratesandlettingof
housing stock.• Advicefromexternalvaluersregarding
their expectations of the value ofstock.
An impairment loss is reversed if the reasons for the impairment loss have ceasedtoapply.Thissurplusordeficitwill be shown in the Statement of Comprehensive Income.
g) Social Housing Grant and otherGovernment grants Where grants are received fromgovernment agencies such as theWelsh Government, local authorities,devolved government agencies,health authorities and the EuropeanCommissionandmeetthedefinitionofgovernment grants, they are recognisedwhen there is reasonable assurancethat the conditions attached to them
will be complied with and that the grant will be received. Dowry gap funding is received from the Welsh Government and it is not repayable.
Government grants are recognised using theaccrualmodelandareclassifiedeither as a grant relating to revenue or a grant relating to assets. Grants relating to revenue are recognised in income on a systematic basis over the period in which related costs for which the grant is intended to compensate are recognised. Where a grant is receivable as compensation for expenses or losses already incurred or for the purpose of givingimmediatefinancialsupportwithno future related costs, it is recognised as revenue in the period in which it becomes receivable.
Grants relating to assets are recognised in income on a systematic basis over the expected useful life of the asset. Grants received for housing properties are recognised in income over the expected useful life of the housing property structure. Where a grant is received specificallyforcomponentsofahousingproperty, the grant is recognised in income over the expected useful life of the component. Grants received from non-government sources are recognised as revenue using the performance model.
h) Donation or acquisition of land orother asset at below market value Where a donation of land and/or otherassets is received or MVH acquires landand/or other assets at below their marketvalue from a third party that does not
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Notes to the Financial Statements Year ended 31 March 2017
meetthedefinitionofagovernmentsource;thetransactionisrecognisedasan asset in the Statement of Financial Position at fair value, taking account of any restrictions on the use of the asset. Incomeequivalenttothedifferencebetween any amounts paid or payable for the asset and the fair value of the asset is recognisedasasurplusordeficitintheStatement of Comprehensive Income as a donation when future performance-related conditions are met.
i) Agreements to improve existingproperties MVH has a 15 year VAT Shelter in place,approved by HMRC. The VAT Sheltertransfers the VAT cost of the worksrequired to meet the Welsh HousingQuality Standard (WHQS) to MTCBC.The transactions are as follows:
• UnderthetransferagreementtheCouncil transferred the properties toMVH together with an obligation toundertake the WHQS works at theCouncil’s expense. The price paid for thepropertieswas£133,023,642;thispricereflectstheTenantedMarketValueofthe stock which is nil and the estimatedvalue of the works of £133,023,642.
• TheCouncildischargeditsobligationtocarry out the works under the TransferAgreement by entering into a 15 yearDevelopment Agreement with MerthyrValleysHomes.Thisisafixedpricecontract for £133,023,642 plus VAT of£19,953,546.
Over the life of the Development Agreement, MVH is entitled to reclaim VAT on the costs it incurs from third parties for carrying out the WHQS works, as detailed in the Development Agreement.
Thecommercialeffectofthesetransactions is that MVH has both an asset (the Council’s obligation to have the refurbishment work carried out) and a legally binding obligation to a third party (under the Development Agreement) and these assets and liabilities are recognised inthefinancialstatements.
j) Inventories Inventories are stated at the lower of costand net realisable value.
k) Restricted reserves Where reserves are subject to an externalrestriction they are separately recognisedwithin reserves as a restricted reserve.Revenue and expenditure is includedinsurplusordeficitintheStatementofComprehensive Income and a transferis made from the general reserve to therestricted reserve. A description of eachrestricted reserve is included in Note 24.
l) Leased assets At inception MVH assesses agreementsthat transfer the right to use assets.The assessment considers whether thearrangement is, or contains, a lease basedon the substance of the arrangement.
Finance leased assets Leases of assets that transfer substantially all the risks and rewards incidental to ownershipareclassifiedasfinanceleases.
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Notes to the Financial Statements Year ended 31 March 2017
Finance leases are capitalised at commencement of the lease as assets at the fair value of the leased asset or, if lower, the present value of the minimum lease payments calculated using the interest rate implicit in the lease.
Assets are depreciated over the shorter of the lease term and the estimated useful life of the asset. Assets are assessed for impairment at each reporting date.
The capital element of lease obligations is recorded as a liability on inception of the arrangement. Lease payments are apportioned between capital repayment andfinancechargetoproduceaconstantrate of charge on the balance of the capital repayments outstanding.
Operating leased assets Leases that do not transfer all the risks andrewardsofownershipareclassifiedasoperating leases.
Payments under operating leases are chargedtosurplusordeficitintheStatement of Comprehensive Income on a straight-line basis over the period of the lease.
m) Interest payable Borrowing costs are interest and othercosts incurred in connection with theborrowing of funds. For new loans, thesecosts are allocated to the Statement ofComprehensive Income over the termof the loan. Where loans are redeemed,the full cost of any redemption penaltyis recognised in the Statement ofComprehensive Income in the yearredemption takes place.
n) Taxation(a) VAT Merthyr Valleys Homes is registered forVAT.ThefinancialstatementsincludeVATtotheextentthatitissufferedbyMerthyrValleys Homes and not recoverable fromHM Revenue and Customs (HMRC). Thebalance of the VAT payable or recoverableat the year end is includedas a current liability or asset.
(b) Corporation Tax MVH is treated as charitable for taxationpurposes.ThiswasconfirmedbyHMRevenue and Customs (HMRC) on 3September 2008.
Consequently, the surpluses derived from primary charitable activities are exempt from taxation.
o) Pensions Local Government Pension Scheme MVH participates in the Rhondda CynonTaf County Borough Council (RCTCBC)Local Government Pension Scheme. TheFund is administered by Rhondda CynonTaf County Borough Council. ManyofthestaffwhotransferredtoMerthyrValleys Homes at the time of transfer weremembers of the fund and any pensionliabilities on transfer were fully fundedby the Council, with subsequent coststo be incurred by the mutual. MerthyrValleys Homes has purchased a PensionBond from the Royal Bank of ScotlandPLC who has agreed to provide thisBond to Rhondda Cynon Taf (RCT) LocalGovernment Pension Scheme inthe sum of £794,000 (the Bond amount).
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Notes to the Financial Statements Year ended 31 March 2017
All existing employees have the option of joining the pension scheme however all new employees are automatically enrolled.Itisadefinedbenefitschemeand since 2014 the scheme provides benefitsbasedoncareeraveragepensionable pay.
The Local Government Pension Scheme is a multi-employer scheme where it is possible for individual employers, as admitted bodies, to identify their share of the assets and liabilities of the pension scheme. For this scheme the amounts charged to operating surplus are the costs arising from employee services rendered during the period and thecostofplanintroductions,benefitchanges, settlements and curtailments. Theyareincludedaspartofstaffcosts.Thenetinterestcostonthenetdefinedbenefitliabilityischargedtorevenueandincludedwithinfinancecosts.Re-measurement comprising actuarial gains and losses and the return on scheme assets (excluding amounts included in net interestonthenetdefinedbenefitliability)are recognised immediately in other comprehensive income.
Definedbenefitschemesarefunded, with the assets of the scheme held separately from those of MVH, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit credit method. The actuarial valuations are obtained at least triennially and are updated at each Statement of Financial Position date.
p) Turnover Turnover represents rent and servicecharges receivable (net of rent and servicecharge losses from voids and the DirectDebit discount) and disposal proceedsof current assets together with revenuegrantsfromlocalauthorities;theWelshGovernment and charitable fees anddonations.
q) Leaseholder sinking fund Where leaseholders pay in advanceforidentifiedfutureplannedormajorworks, any unutilised contributions arerecognised as a liability in the Statementof Financial Position.
r) Financial instrumentsFinancialassetsandfinancialliabilitiesare recognised when MVH becomes aparty to the contractual provisions of theinstrument.
Financial Assets Financial assets comprise rent arrears, trade and other receivables and cash and cash equivalents. Financial assets are initially recognised at transaction value plus directly attributable transaction costs.
Provision is made against rent arrears of current and former tenants as well as other debts, to the extent that they are considered potentially irrecoverable.
Afinancialassetisderecognisedwhenthecontractualrightstothecashflowsexpire,orwhenthefinancialassetandall substantial risks and reward are transferred.
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Notes to the Financial Statements Year ended 31 March 2017
If an arrangement constitutes a financingtransaction,thefinancialasset is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Financial Liabilities Thesefinancialliabilitiesincludetradeandother payables and interest bearing loans and borrowings.
Non-current debt instruments which meet the necessary conditions in FRS 102 are initially recognised at transaction value adjusted for any directly attributable transaction cost, with interest-related charges recognised as an expense infinancecostsintheStatementofComprehensive Income. Where a non-current debt instrument has a non basic element, this is measured at fair value annually with any change recognised in the Statement of Comprehensive Income.
Afinancialliabilityisderecognisedonlywhen the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.
s) Cash and cash equivalents Cash and cash equivalents comprise cashin hand and demand deposits, togetherwith other short term, highly liquidinvestments that are readily convertibleinto known amounts of cash and aresubjecttoaninsignificantriskofchangesin value.
3. Significant Management Judgementsand Key Sources of Estimation UncertaintyThepreparationofthefinancialstatementsrequires management to make judgements,estimatesandassumptionsthataffecttheapplication of policies and reported amountsof assets and liabilities, income and expenses.The estimates and associated assumptionsare based on historical experience andvarious other factors that are believed to bereasonable under the circumstances, theresults of which form the basis of making thejudgements about the carrying value of assetsand liabilities that are not readily apparentfromothersources.Actualresultsmaydifferfrom these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in anyfutureperiodsaffected.
Significant management judgements The following are management judgements in applying the accounting policies of MVH thathavethemostsignificanteffectontheamountsrecognisedinthefinancialstatements.
Impairment of social housing properties MVH have to make an assessment as to whether an indicator of impairment exists, In making the judgement, management considered the detailed criteria set out in the SORP.
Estimation uncertainty MVH make estimates and assumptions concerning the future. The resulting accountingestimateswill,bydefinition,
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31
Notes to the Financial Statements Year ended 31 March 2017
seldom equal the related actual results, The estimates and assumptions that have asignificantriskofcausingamaterialadjustment to the carrying amounts of assetsandliabilitieswithinthenextfinancialyear are addressed below.
Fair value measurement Management uses valuation techniques to determine the fair value of assets. Details ofMVH’sfinancialinstrumentsmeasuredat fair value are set out in note 21. Treasury management specialists are engaged to provide MVH with the valuation. Investment properties are measured at fair value, using marketvaluespreparedbyafirmofpropertyvaluation experts.
Provisions Using information available at the year end date, management estimate the level of provision required to account for potentially uncollectible debts.
Definedbenefitpensionscheme MVH has obligations to pay pension benefitstocertainemployees.Thecostofthesebenefitsandthepresentvalueoftheobligation depend on a number of factors, including life expectancy, salary increases, asset valuations and the discount rate of corporate bonds. Management estimates these factors in determining the net pension asset in the Statement of Financial Position.Theassumptionsreflecthistoricalexperienceandcurrenttrends.Afirmofactuaries are engaged to provide MVH with expert advice about the assumptions to be applied.
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Notes to the Financial Statements Year ended 31 March 2017
4) Turnover, Operating Costs and Operating Surplus
Particulars of turnover, cost of sales, operating costs and operating surplus
Note A2017 2017 2017 2016 2016 2016
Turnover
£’000
OperatingCosts£’000
OperatingSurplus
£’000
Turnover
£’000
OperatingCosts£’000
OperatingSurplus
£’000
17,925 15,100 2,825 17,363 15,325 2,038
92 108 (16) 75 80 (5)
Social Housing lettings
(Note B)
Other social housing activities:Supporting People
Other grant income
25 - 25 78 - 78
Other income 395 - 395 165 - 165
Total 18,437 15,208 3,229 17,681 15,405 2,276
.
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33
Notes to the Financial Statements Year ended 31 March 2017
Note B
IncomeRents receivableService charges incomeAmortised government grantsTurnover from social housing lettings
ExpenditureService charge costsManagementTenant supportRoutine maintenanceMajor repairs expenditureBad debts from rentBad debts from other incomeDepreciation of housing propertiesOperational costs
Operating surplussocial housing lettingsVoid losses
General Needs£’00015,455
641,471
16,990
12,855
1885,5752,721
7845
3,16314,626
2,364
144
Particulars of income and expenditure from social housing lettings
ShelteredHousing
£’000791144
-935
63411
------
474
461
4
2017£’000
16,246208
1,47117,925
643,266
1885,5752,721
7845
3,16315,100
2,825
148
2016£’000
15,699246
1,41817,363
633,397
3275,6742,536
8255
3,19115,325
2,038
330
Within grant and other income in Note A is income received from the following:
Grants from Supporting People Revenue Grant (SPRG)Other grant incomeShop rentsLeaseholdersOther income
2017£’000
9225
13776
182
2016£’000
757899
-66
Year ended 31 March 2017
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34
Notes to the Financial Statements Year ended 31 March 2017
2017£’000
1503,125
38247
23171
9148123
2016£’000
1133,219
-30122
1717
330137
2016£’0001,176(237)939(53)886
2017£’000
16177193
2016£’000
18122140
5) Operating SurplusOperating surplus for the year is after charging:
Amortisation – intangible assetsDepreciation – housing propertiesImpairment – housing propertiesDepreciation –otherfixedassetsAuditor’s remuneration in respect of audit servicesOperating lease rentals (premises)Operating lease rentals (other)Rent losses from voidsBad debt costs
6) Surplus on Disposals of Property, Plant and Equipment
7) Interest Receivable
Bank interest receivablePensionfinanceincomeTotal
Sales proceedsLess costs of saleSurplus on sale of housing propertiesLossonthedisposalofotherfixedassetsSurplus on disposal
Sales proceeds relates to the sale of 14 Right to Buy properties (2016: 24 properties).
2017£’000
773(202)
571(153)418
2017£’0001,851
141,865
2016£’0001,846
81,854
8) Interest and Financing Costs
Bank loans and overdraftsFinance lease chargesTotal
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Notes to the Financial Statements Year ended 31 March 2017
9) Directors’ Emoluments
The highest paid director (Chief Executive) is an ordinary member of the Merthyr ValleysHomesdefinedbenefitpensionschemewithnoenhancedorspecialtermsapplied to their membership. MVH makes no contribution to any individual pension arrangement in respect of the highest paid director other than LGPS contributions.
No remuneration was paid to the members of the Board during the year (2016: £Nil).
The full time equivalent number of key personnel including the Chief Executive whose remuneration payable in the period fell within the following bands:
ThekeymanagementpersonnelaretheExecutiveOfficerslistedonpage3.
Wages and salariesSocial security costsOther pension costsTotal Staff Costs
Emoluments of the highest paid Director, excluding pension contributions
2017£’000
3574517
419
121
2016£’000
3584121
420
118
2017No.
3--1
2016No.
3-1-
£90,001- £100,000£100,001 - £110,000£110,001 - £120,000£120,001 - £130,000
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
11) Intangible Assets
Cost
At beginning of yearAdditions during the yearDisposals during the yearAt end of year
AmortisationAt beginning of yearCharge for the yearDisposals during the yearAt end of year
Net book valueAt end of year
At beginning of year
Computer software£’000
1,083393
(4)1,472
581150(3)
728
744
502
10) Staff Costs
Staffcostsduringtheyear:Wages and salariesSocial security costsOther pension costsTotal staff costs
The average monthly number of staff – full time equivalent
This comprises:Central Support Services, encompassing:Finance, HR, Corporate Services and AdministrationAsset ManagementProperty Services TeamHousingTotal
Staffemployedatyearend– full time equivalentThe calculations are based on a 37 hour working week
2017£’000
5,013597
1,0446,654
2017No:
359
9356
193
191
2016£’000
4,988551
1,0366,575
2016No:
358
9552
190
193
The cost includes £1,023,000 of externally purchased computer software and £449,000 of internally generated computer software.
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Notes to the Financial Statements Year ended 31 March 2017
Costs capitalised during the year related to components. Total expenditure on properties during the year was £15.05m. Of this £6.75m was capitalised and £8.3m was expensed through the Statement of Comprehensive Income.
An impairment of housing properties has been made in 2016/17 writing down the value of 8 properties which are proposed to be demolished in 2017/18 to land value. An impairment charge of £38,000 has been recognised at the year end in respect of these properties.
12) Tangible Fixed Assets – Housing and Other Properties
CostAt beginning of yearTransferred on completionAdditions during the yearDisposals during the yearAt end of year
DepreciationAt beginning of yearCharge for the yearDisposals during the yearImpairments during the yearAt end of year
Net book valueAt end of year
At beginning of year
Housing properties
held for letting£’000
63,969423
6,336(401)
70,327
11,6453,125
(67)38
14,741
55,586
52,324
Housing properties in the course of construction
£’00022
(423)413
-12
-----
12
22
2017Total
£’00063,991
-6,749(401)
70,339
11,6453,125
(67)38
14,741
55,598
52,346
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
14) Tangible Fixed Assets - Other
Cost
At beginning of yearAdditions during the yearDisposals during the yearAt end of year
DepreciationAt beginning of yearCharge for the yearDisposals during the yearAt end of year
Net Book ValueAt end of year
At beginning of year
OfficeFurniture
£’000
49388(9)
572
27377(2)
348
224
220
Office Equipment
£’000
590126(86)630
35594
(85)364
266
235
SchemeEquipment
£’000
1436
(17)132
299
(5)33
99
114
Motor vehicles
£’000
604166
(437)333
47967
(437)109
224
125
13) Housing Stock
General NeedsShelteredGaragesRetail PremisesCo-operative HousingLeasehold HousesLeasehold FlatsLeasehold GaragesLeasehold Retail PremisesTotal
2017No
3,9542064143312
170113214
75,123
2016No
3,9762064163212
176112214
75,151
£’000
236660
-896
----
896
236
2017Total
£’000
2,0661,046(549)2,563
1,136247
(529)854
1,709
930
Officeequipmentincludesfinanceleaseswithacostof£20,000(2016:£83,000),accumulated depreciation of £17,000 (2016: £72,000) and a net book value of £3,000 (2016:£11,000).Motorvehiclesincludesfinanceleaseswithacostof£333,000(2016:£604,000), accumulated depreciation of £109,000 (2016: £479,000) and a net book value of £224,000 (2016: £125,000).
Office premises in
the course of construction
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39
Notes to the Financial Statements Year ended 31 March 2017
17) Debtors: Amounts Falling Due Within One Year
Rent arrearsLess: Provision for bad debts
Sales DebtorsLess: Provision for bad debts
VATOther Debtors Total
2017£’000
802(295)
507234
(168)6689
333995
2016£’000
793(276)
517174
(144)3062
4581,067
Analysis of stock held:
Materials and consumables
2017£’000
15
2016£’000
12
16) Inventories
15) Investment Properties
Had the investment properties been measured at historical cost, the carrying value would be £Nil (2016: £Nil).
The fair value of the investment properties was undertaken by Savills, a global real estate services provider who specialise in loan valuations for security and accounts for Housing Associations and Local Authorities and hold a professional qualificationwiththeRoyalInstituteofCharteredSurveyors(RICS).Themethodofdetermining fair value was by reference to market value for comparable property. Other factors taken into account include the tenure of the property, tenancy details, the condition of the building, the environmental risks associated with the propertyandthefloorareasoftheproperties.Thevaluationisobtainedtriennially,the last valuation being undertaken by Savills in May 2015. A review of investment propertieswasundertakenat31March2017toconfirmthevalidityofthevaluation.
2017£’000
897-
897
2016£’000
897-
897
At 1 AprilChanges on revaluation of investment propertiesAt 31 March
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
19) Creditors: amounts falling due within one year
Bank loans and overdraftsObligationsunderfinanceleasesAccrualsDeferred incomeRents received in advanceSalary and other employee costsOther taxation and social securityCapital expenditure on housing propertiesGovernment grantsOther capital creditorsTotal
2017£’000
36666
1,06836
158291170
1,018-
1673,340
2016£’000
36544
87832
151398169
1,0966736
3,236
18) Debtors: Amounts falling due after one year2017
£’00071,592(6,616)64,976
2016£’000
78,732(7,140)71,592
WHQS WorksAt beginning of yearReleased during the yearAt the end of the year
See note 29 Provisions for Liabilities forinformation.
20) Creditors: amounts falling due after more than one year
Bank loans - basicBank loan issuing costsOther loansObligationsunderfinanceleasesTaf Fechan sinking fundLeaseholder sinking fund
Environmental Warranty due to MTCBC
2017£’000
24,000(578)469170
5347
24,413314
24,727
2016£’000
24,000(612)490
96-
37624,350
31424,664
See note 20 for details of security provided
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41
Notes to the Financial Statements Year ended 31 March 2017
Bank loansOn demand or within one yearbetween one and two yearsbetweentwoandfiveyearsAfterfiveyears
2017£’000
366--
24,46924,835
2016£’000
365--
24,49024,855
Borrowings
Housing loans are secured (via Prudential Security Trustee) by a charge on the totalpropertystockownedbyMVH.Theinterestrateisfixedat4.345%orvarieswith the market rate. To fund the WHQS works MVH has arranged a loan facility of £40m to be drawn down over several years. The issuing costs relate to the arrangement fee of the loan facility.
At 31 March 2017 MVH had undrawn loan facilities of £16 million.
£20mofourcurrentloansoutstandingareonfixedrates.Afurtherfixedrateagreement is in place for £10m from 1 April 2020.
During 2014/15 MVH received a 25 year loan of £510,000 on a PWLB interest rate of 2.92% from MTCBC to fund the refurbishment of Taf Fechan House as part of MTCBC’s Vibrant and Viable Places project.
FRS102hasresultedinthereclassificationofanumberofmotorvehicleandofficeequipmentleasesfromoperatingleasestofinanceleases.
Finance LeasesOn demand or within one yearbetween one and two yearsbetweentwoandfiveyearsAfterfiveyears
2017£’000
6665
105-
236
2016£’000
443462
-140
Finance Leases
Year ended 31 March 2017
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42
Notes to the Financial Statements Year ended 31 March 2017
Taf Fechan sinking fund The members of Taf Fechan Housing Co-operative pay in advance for future planned
or major works. Any unutilised contributions are recognised as a liability in the Statement of Financial Position. This liability will reduce in line with completed planned or major works on the property.
Leaseholder sinking fundUnderSORP2014,whereleaseholderspayinadvanceforidentifiedfutureplannedormajor works, any unutilised contributions are recognised as a liability in the Statement of Financial Position. This liability will reduce annually in line with completed planned or major works on leasehold properties.
Environmental Warranty As part of the Transfer Agreement with MTCBC, MVH is required to pay the Council
an amount equivalent to the costs which MTCBC incurs in securing environmental insurance in relation to MVH’s properties until 2039. Under the terms of the Transfer, this would be limited to £500,000. This cost was included in full in the set up costs in the 2009 Financial Statements. MTCBC currently has insurance up to 29 March 2019. The balance still owed to MTCBC under this agreement is £313,901.
21) Financial InstrumentsThecarryingvaluesofMVH’sfinancialassetsandliabilitiesaresummarisedbycategorybelow:
Finance assetsMeasured at amortised cost:Rent arrears (see note 17)Sales debtors (see note 17)
2017£’000
802234
1,036
2016£’000
793174967
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Notes to the Financial Statements Year ended 31 March 2017
Financial liabilitiesMeasured at amortised cost:Loans payable (see note 20)Obligationsunderfinanceleases(seenotes19and20)Bank loans and overdrafts (see note 19)Capital creditors (see note 19)Leaseholder sinking fund (see note 20)Taf Fechan sinking fund (see note 20)Environmental Warranty (see note 20)
Interest income and expenseTotalinterestincomeforfinancialinstrumentsatamortisedcost Totalinterestexpenseforfinancialinstrumentsatamortisedcost
Fair value gains and lossesOnfinancialliabilitiesmeasuredatfairvaluethroughStatementof Comprehensive Income
2017£’000
24,469236366
1,185347
5314
26,922
2017£’000
161,865
-
2016£’000
24,490140365
1,132376
-314
26,817
2016£’000
181,854
1,214
MVH’sincome,expense,gainsandlossesinrespectoffinancialinstrumentsare summarised below:
Year ended 31 March 2017
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22) Dowry funding and other govenment grants
Dowry funding and other grantsAt beginning of yearTransferred on CompletionAdditions during the yearDisposals during the yearRecycled grant during the yearAt end of year
Amortisation of GrantsAt beginning of yearCharge for the yearDisposals during the yearAt end of year
Net Book ValueAt end of year
At beginning of year
Amounts falling due:Within one year or lessIn more than one yearTotal grant creditor
Housing properties
held for letting£’000
(29,270)(68)
(2,952)222
(222)(32,290)
6,0821,513
(43)7,552
(24,738)
(23,188)
1,51323,22524,738
Housing properties in the course of construction
£’000
-68
(68)---
----
-
-
---
2016Total
£’000
(25,941)-
(3,329)144
(144)(29,270)
4,6651,443
(26)6,082
(23,188)
(21,276)
1,44321,74523,188
Notes to the Financial Statements Year ended 31 March 2017
2017Total
£’000
(29,270)-
(3,020)222
(222)(32,290)
6,0821,513
(43)7,552
(24,738)
(23,188)
1,51323,22524,738
Cumulative total capital grants received are £32.29m. This relates to £26.78m of dowry funding,£3.79mofenergyefficiencygrantsand£1.72mofsocialhousinggrant.
Dowry funding relates to the dowry grant received from the Welsh Government. In addition to the £2.9m received, £222k relating to the disposal of components was re-used during the year.
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Notes to the Financial Statements Year ended 31 March 2017
23) Share Capital
All shares were cancelled when the organisation changed to a mutual on 1 May 2016. As at 31 March 2017 there were 1,065 members of the mutual. Members have the right to vote at Members Meetings but membership does not carry the right to dividend payments or distribution on winding up.
Shares at beginning of year Issued during the yearCancelled during the yearAt the end of the year
2017No36
1,065(36)
1,065
2016No39
-(3)36
24) Restricted Reserves
Pension ReserveAt beginning of yearActuarial movementTransfertotheIncome&ExpenditureAt the end of the year
Big Lottery FundAt beginning of yearUtilised during the yearTransferfromtheIncome&ExpenditureAt the end of the year
2017£’0004,860(516)(579)
3,765
£’0002-
(1)1
2016£’0003,5371,879(556)
4,860
£’0001-12
This reserve matches the value of the Pension Fund Asset. It is therefore restricted and not available to be spent for any general purpose of MVH.
Funding is received from the Big Lottery Community Voice grant for Perthyn: Belonging project. This is a project between younger and older people living inthreeareasofMerthyrTydfillookingatsocialhousingtenantsexperienceover time. It is restricted in line with the terms of the grant. Total grants received during the year was £24k.
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
25) Operating Leases
Total future minimum lease payments under non-cancellable operating leases are asfollows:
Operating Leases costs due:Within one yearBetweentwoandfiveyearsInmorethanfiveyears
2017£’000
171190
-361
2016£’000
171361
-532
2017£’000
94-
13
2016£’000
72-9
Land & Buildings Other
26) Financial Commitments
Financial commitments are as follows:
Contracted for but not provided forwithin one yearbetweenoneandfiveyearsafterfiveyears
Approved by the directors but not contracted for
2017Total
£’000
3,52450
-
-
2016Total
£’000
952500
-
177
The mutual expects that any expenditure that has been authorised will be fully funded by grants and loan draw downs.
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Notes to the Financial Statements Year ended 31 March 2017
27) Notes to the Statement of Cash flows
Net cash generated from operating activitiesOperating Surplus for the yearAdjustment for non cash items:Amortisation of intangible assetsDepreciation of property, plant and equipmentAmortisation of government grantsWorking capital movements:(increase) / decrease in inventoriesDecrease in debtors < 1 yearDecrease in debtors > 1 yearIncrease / (decrease) in creditors < 1 year(Decrease) / increase in creditors > 1 year(Decrease) in provisionsPensions costs less contributions payableCarrying amount of property, plant and equipment disposalsImpairment loss on property, plant and equipment disposalsAdjustingforinvestingandfinancingitems:Surplus on disposal of property, plant and equipmentInterest receivable InterestandfinancingcostsChangeinfairvalueoffinancialinstrumentsNet cash generated from operating activities
Cash and cash equivalentsCash at bank and in handCash and cash equivalents
2017£’0001,975
1503,372
(1,513)
(3)72
6,61694
(24)(6,836)
756(3)38
(418)(193)1,865
-5,948
£’0002,0612,061
2016£’0002,662
1133,520
(1,443)
9189
7,140(1,045)
268(6,920)
678(19)
-
(886)(140)1,854
(1,214)4,766
£’0002,2142,214
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
28) Related PartiesDuring 2016/17 MVH became a mutual organisation and the structure of our Boardchanged. As at 31 March 2017 we had 7 independent Board Members, none of whichare our tenants or related parties.
The Democratic Body includes 11 tenant members. Tenancies provided to DemocraticBody members are based on the MVH standard terms and members cannot use theirposition to their advantage. As at 31 March 2017 cumulative rent arrears for the tenantmembers totalled £271 and cumulative receipts totalled £46,051.
The Democratic Body includes 8 employee members of which 7 were in post at theyear end. As at 31 March 2017 cumulative salary payments for the employeemembers totalled £231,628.
The Democratic Body includes 2 Council Representatives. Any transactionswith the Council are at arm’s length, on normal commercial terms and CouncilRepresentatives cannot use their position to their advantage. During the year MVHmade payments totalling £4.49m to MTCBC primarily in relation to the payroll andServiceLevelAgreements;theremainderbeinginrelationtobusinessratesandother costs. Included in debtors is £20,660 which includes a prepayment on annualbusiness rates. Included in creditors is £367,265 relating to payroll costs and ServiceLevel Agreements and included in creditors > 1 year is £313,901 relating to theenvironmentalwarranty;allduetoMTCBC.
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Notes to the Financial Statements Year ended 31 March 2017
29) Provisions for liabilities
VR / VERAs at 31 March 2016 we issued 9 voluntary redundancy / early retirement notices whichtookeffectonorbefore31May2016.WHQS WorksUnder the transfer agreement the Council transferred the properties to MVH together with an obligation to undertake the WHQS works at the Council’s expense. Thepricepaidforthepropertieswas£133,023,642;thispricereflectstheTenantedMarket Value of the stock which is nil and the estimated value of the works of £133,023,642. At 31 March 2017 £64.976m (2016: £71.592m) is shown in Debtors: amounts falling due after one year and in provisions for liabilities.
At beginning of yearProvided for during the yearUsed during the yearReleased during the yearAt the end of the year
VR/VER£’000
220-
(220)-
220
WHQS Works£’00071,592
--
(6,616)64,976
2017£’00071,812
-(220)
(6,616)64,976
2016£’000
78,732220
-(7,140)71,812
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
Assumption31 March 2017
(% p.a.)31 March 2016
(% p.a.)
Discount rate 2.60% 3.50%
RPIinflation 3.10% 2.90%
CPIinflation 2.00% 1.80%
Increase to pensions in payment 2.00% 1.80%
Pension accounts revaluation rate 2.00% 1.80%
Salary increases 3.25% 3.30%
Financial assumptions for valuing the funded LGPS Liabilities
30) Events after the Reporting DateThere are no events after the reporting date.
Merthyr Valleys Homes’ employees are eligible to join the RCTCBC Pension Fund,which is a local government pension scheme (LGPS). MVH was admitted to thescheme on 30 March 2009. This disclosure relates to the period between 1 April 2016and 31 March 2017.
TheLGPSisafundeddefinedbenefitscheme,withassetsheldinaseparatetrusteeadministered fund. Contributions in the year totalled £681,793 of which employerscontributions totalled £380,829 and employees totalled £300,964.
In accordance with the requirements of FRS102 the pension fund is valued by aqualifiedindependentactuaryinordertoascertainthevalueoftheschemeandtheprevious year has been restated accordingly.
Contributions for the year ended 31 March 2018Regular employer contributions to the fund for the year ended 31 March 2018 areestimated to be £297,664.
AssumptionsThe latest actuarial valuation of the fund liabilities took place as at 31 March 2016.Liabilitieshavebeenestimatedbytheindependentqualifiedactuaryonanactuarialbasis using the projected unit credit method. The principle assumptions used were:
31) Pension Costs
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Notes to the Financial Statements Year ended 31 March 2017
Asset allocation
Asset class Value at31 March 2017
Value at31 March 2016
Equities 72.6% 70.1%
Property 5.9% 6.4%
Government bonds 9.4% 9.2%
Corporate bonds 10.0% 10.6%
Cash 2.1% 3.7%
Other 0.0% 0.0%
Males 31 March 2017 31 March 2016Member aged 65 at accounting dateMember aged 45 at accounting date
22.825.0
23.125.3
Females 31 March 2017 31 March 2016Member aged 65 at accounting dateMember aged 45 at accounting date
24.927.2
26.028.4
Mortality assumption at 31 March 2017 and 31 March 2016
The split of the liabilities at the last valuation between the various categories of members
Active members 69.0%Deferred pensioners 8.0%Pensioners 23.0%
Amounts recognised in other comprehensive income
31 March 2017£M’s
31 March 2016£M’s
Assets gains / (losses) arising during the period 4.921 0.071
Liability gains / (losses) arising during the period (5.437) 1.808
Total amount recognised in other comprehensive income (0.516) 1.879
Year ended 31 March 2017
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Notes to the Financial Statements Year ended 31 March 2017
Reconciliation of funded status to Financial Position
31 March 2017£M’s
31 March 2016£M’s
Fair value of assets 36.226 29.934
Presentvalueofpresentdefinedbenefitobligation
32.461 25.074
Net pension asset 3.765 4.860
Changes to fair value of assets
31 March 2017£M’s
31 March 2016£M’s
Opening fair value of assets 29.934 28.600Interest income on assets 1.054 0.949
Remeasurement gains / (losses) in assets 4.921 0.071
Contributions by the employer 0.381 0.359
Contributions by participants 0.301 0.284
Netbenefitspaidout (0.365) (0.329)
Net increase in assets from disposals / aquisitions 0.000 0.000
Settlements 0.000 0.000
Closing fair value of assets 36.226 29.934
Changes to present value of the defined benefit obligation
31 March 2017£M’s
31 March 2016£M’s
Opening present value of liabilities 25.074 25.063Current service costs 1.043 1.037
Interest expense 0.877 0.827
Contributions by participants 0.301 0.284
Actuarial losses / (gains) on liabilities 5.437 (1.808)
Netbenefitspaidout (0.365) (0.329)
Past service costs 0.094 0.000
Curtailments 0.000 0.000Net increase in liabilities from disposals / aquisitions 0.000 0.000
Settlements 0.000 0.000
Closing defined benefit obligation 32.461 25.074
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Notes to the Financial Statements Year ended 31 March 2017
31 March 2017£M’s
31 March 2016£M’s
Interest income on assets 1.054 0.949
Gain / (losses) on assets 4.921 0.071
Actual return on assets 5.975 1.020
Actual return on assets
Year ended 31 March 2017
Merthyr Valleys Homes Ltd. MartinEvansHouse,RiversideCourt,AvenuedeClichy,MerthyrTydfilCF478LD