WWH annual report & financial statements 2012

Annual Report

& Financial Statements 2012

strong sustainable growth to make a difference to people’s lives, homes and communities

Annual report and financial statements

Page

Members, executives and advisors

2

Operating and financial review

3

Governance

17

Internal Control

20

Statement of Board responsibilities

21

Independent Auditor Report

22

Income and Expenditure Account

24

Reconciliation of movement in net assets Balance sheet

24

25

Cash flow statement

26

Notes to the financial statements

27

Annual Report 2012

Page 1 of 47

Annual report and financial statements

Members, executives and advisors

The Board Mrs K Smart Mr A Ashton Mr J Clowes Mr R Cornish Mr D Davies Mrs W Davies

Mrs R Fleri Mr I Gittens

Mr B Jarvis Mrs S Lee Mr N O’Leary Mr W Phillips Mr J Rides

Mr J Williams

Chair of the Board; Shareholder Board Member Vice Chair of the Board; Shareholder Board Member; Lead Member for Finance Shareholder Board Member; Chair of the Probity and Audit Committee; Board Member Cambria Maintenance Services Ltd Resident Board Member; Appointed 26 April 2012, Resigned 26 February 2013 Resident Board Member; Member of Probity and Audit Committee; Board Representative Merthyr Care and Repair Shareholder Board Member; Board Representative for Slocombe Cottages for the Aged and Infirm; Member of Probity and Audit Committee Shareholder Board Member; Member of Probity and Audit Committee; Appointed 26 April 2012 Shareholder Board Member; Lead Member for Support Services; Board Representative for Slocombe Cottages for the Aged and Infirm; Board Representative Bridgend Care and Repair Resident Board Member; Member of Probity and Audit Committee Shareholder Board Member; Lead Member for Housing Shareholder Board Member; Lead Member for Development; Chair of the Cambria Maintenance Services Limited Board Shareholder Board Member; Member of Probity and Audit Committee; Resigned 26 April 2012 Resident Board Member; Member of Probity and Audit Committee; Board Member of Cambria Maintenance Services Limited; Resigned 26 April 2012 Resident Board Member; Lead Member for Property Services; Board Member of Cambria Maintenance Services Limited; Board Representative Flintshire Care and Repair

Executive Officers Mrs Anne Hinchey Mr Shayne Hembrow Mr Tony Wilson Mr Steve Porter

Registered Office 3 Alexandra Gate Ffordd Pengam Cardiff CF24 2UD

Chief Executive and Secretary; Board Member Cambria Maintenance Services Limited, Enfys Developments Limited and Castell Homes Limited Deputy Chief Executive and Commercial Director; Board Member Cambria Maintenance Services Limited, Enfys Developments Limited and Castell Homes Limited Finance Director; Board Member Cambria Maintenance Services Limited, Enfys Developments Limited and Castell Homes Limited Operations Director; appointed 1 November 2012; Board Member Enfys Developments Limited and Castell Homes Limited

Independent Auditors Haines Watts Wales LLP

Registered as a charitable Association under the Industrial and Provident Societies Act 1965, Registration Number 21114R Registered with the National Assembly for Wales, Registration Number L032

Annual Report 2012

Page 2 of 47

Annual report and financial statements Operating and financial review

The Board presents its report and the audited financial statements for the year ended 31 December 2012.

Our vision and culture

Our vision is:

Strong, sustainable growth to make a difference to people’s lives, homes and communities.

This vision underpins all that we do, driving our corporate priorities and actions. Our priorities follow a number of themes bringing a clear structure to help guide and manage all that the Association hopes to achieve.

     

More; providing homes for people in housing need Better; maximising our impact in all that we do

Greener; minimising the impact on the environment by WWH and our residents Wiser; making the best use of our assets

Smarter; making the best use of technology

Together; working with residents and communities to make a difference

In this operating and financial review, we have set out our progress during the year under these themes, augmented by an overview of how the organisation is run.

The culture at the core of our business is made up from two main strands, our values and our operating principles. Our operating principles guide us in identifying exactly what work we undertake and our values guide us in how we carry out that work.

During 2012 WWH successfully rebranded the Group, helping us to maintain a clear, current and relevant presence within the sector and changing the presentation of our values and operating principles.

Annual Report 2012

Page 3 of 47

Annual report and financial statements More; providing homes for people in housing need

In 2012 we brought into management 54 newly developed properties across Wales to add to the 165 properties developed in 2011.

Homes developed in 2012 Pencoedtre, Vale of Glamorgan ‐ 20 Social Rented Parc Tyn y Coed, Bridgend ‐ 10 Intermediate Rented

8 3

20

Cwmfalldau, Powys ‐ 7 Intermediate Rented Henllan, Denbighshire ‐ 6 Social Rented

6 Henllan, Denbighshire ‐ 3 Supported Housing

7

Mortgage rescues ‐ 8 homes

10 Total ‐ 54 homes

Within this number are 3 units for supported living, at Cil y Coed, Henllan, a scheme of 3 unique bungalows completed in 2012 providing state‐of‐the‐art supported accommodation for local people with autistic spectrum disorders and physical disabilities.

These bungalows have been built especially to meet the specific need of the incoming residents and were recognised for excellence as finalists in the Development of the Year category of the Welsh Housing Awards 2012.

With the end of the Welsh Government’s mortgage rescue scheme, our self‐ funded mortgage rescue scheme helps home owners who are struggling to pay their mortgages and are at risk of repossession. During 2012 there were 8 outright mortgage rescue property purchases enabling people to remain in their own homes during difficult times.

We are working hard with our local authority partners to continue our strong sustainable development growth with preparatory or construction work currently ongoing on ten sites, which will bring a further 296 homes into management over the next two years. In addition, the Association successfully increased its land bank in the year and owns 6 sites for future development. The access to a strong land bank has been invaluable for the Association in delivering affordable housing so further site acquisitions will remain a priority.

Annual Report 2012

Page 4 of 47

Annual report and financial statements Number of homes under development as at 31st December 2012 Kingsmill Road, Wrexham ‐ 92 Social Rented Llys Jasmine, Flintshire ‐ 63 Extra Care Units

4 12 9

Rivulet Road, Wrexham ‐ 55 Social Rented

14

Coed Castell Ph 2, Bridgend ‐ 23 Social Rented

15

92

Brython Drive, Cardiff ‐ 9 Social Rented

9

Cwmfalldau, Powys ‐ 9 Intermediate Rented

23

Vulcan House, Merthyr ‐ 15 Social Rented West Shore, Conwy ‐ 12 Social Rented Maesgwyn, Bridgend ‐ 14 Social Rented

55

63

Ty Gwyn, Cardiff ‐ 4 Social Rented Total ‐ 296 homes

In previous years virtually all of our developments were undertaken with the benefit of Social Housing Grant (SHG), which in recent years amounted to approximately 58% of the development costs. As a result of reducing grant allocations for Wales, much less SHG is likely to be available going forward and therefore different funding and rental mechanisms will be required. One of these is the new Welsh Government Social Housing Revenue Grant (SHRG), where grant will be paid annually in installments over 30 years rather than as an upfront payment. As demand for affordable housing generally remains high and a large number of enquiries are received for all types of rented housing, we have confirmed development investment over the next five years as shown below:

Development spend 2013‐2017 35 30

£m

25 20

Development Spend

15

Social Housing Grant

10 5 ‐

2013

2014

2015

2016

2017

In addition, in order to maximise flexibility within the Group to add much needed homes at affordable rent as well as homes for sale, WWH has created two subsidiary companies, Castell Homes and Enfys Developments. Their creation will allow appropriate management of risk for the increasingly wide variety of development models the Association will use as grant subsidies decrease, as well as providing the most efficient management of tax liabilities for the Group as a whole. Branding for Castell Homes, the public facing subsidiary was completed as part of the Group wide rebranding during 2012.

Better; maximising our impact in all that we do

Annual Report 2012 Page 5 of 47

Annual report and financial statements

Cambria Maintenance Services

Since January 2011 our Cambria Maintenance Services Limited (Cambria) subsidiary has undertaken most of our reactive maintenance works and some of our planned works in South and Mid Wales.

Cambria performance 3.5 3 2.5 2

2011

1.5

2012

1 0.5 0 Turnover

Labour

Materials

Overheads

Profit

The business has undertaken over 16,500 repairs over the course of the year in addition to refurbishing 147 kitchens and bathrooms using its 45 directly employed staff. Cambria has delivered savings to the Association, which would not have been delivered with a third party contractor, in respect of retained profit and VAT savings on labour costs. This saving equates to around £320k (2011: £200k). In the Association’s accounts this has enabled our direct reactive maintenance cost per property (excluding Association management and overhead costs) to remain relatively unchanged at £438 (2011: £423) in Mid and South Wales, offsetting all material and labour cost increases by delivering a real saving of 6% over the first two years. Having full end to end ownership of the maintenance service has allowed a greater understanding to be gained of how well the system is performing and what improvements can be made.

Expansion of Cambria

Following the success of setting up Cambria Maintenance Services Ltd for the repairs service in South and Mid Wales, 2012 saw significant preparatory works undertaken to enable Cambria to extend its provision of both reactive and planned maintenance services to North Wales from the 2nd January 2013. This will allow a repeat of the savings in South and Mid Wales through retained profit and VAT on labour costs whilst gaining better understanding of service performance.

Our services

Embedding cultural change continued to be a key feature of the year. Since adopting the systems thinking approach the Association has completed reviews of the majority of its services. Systems thinking challenges the conventional approach to management and this change takes time to embed across the organisation. The operating principles we developed along with our values continue to provide a strong focus.

The maintenance of our homes remains the litmus test for customer satisfaction and this remains strong as shown below:

Annual Report 2012

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Annual report and financial statements

Repairs performance Complete in one visit Stay Fixed Satisfaction with reaction service 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Alongside our work with Cambria’s expansion we have also been continuing with the systems thinking redesign of our internal repairs system. This started in a small area of Cardiff in January with a small team taking the live calls from our residents, making an appointment to suit the resident and then undertaking the repair. The team consisted of both WWH and Cambria staff enabling the whole end‐to‐end repair to be owned within one team. This was expanded throughout Cardiff increasing the number of operatives and areas of operation. Additional staff were brought in to receive the residents’ calls and manage the appointment diary. During this expansion large amounts of data have been collected, collated and analysed to allow changes to the system to be measured. At the end of 2012 we now have all but the Bridgend area of Cambria reactive work being handled via the redesign system and we will continue to develop this further in 2013.

During the year we reviewed our approach to managing our estates and in particular how we work with residents and partners to minimise anti‐social behaviour. This involved listening to residents to establish exactly what things matter to them when they experience difficulties in their communities and understanding how well we assist in delivering what matters. A new, more collaborative, less formal system has emerged as a result of the review work, with staff working alongside residents to help them achieve solutions. The new approach will be implemented during 2013 with measures in place to judge the subsequent effects.

Throughout 2012 we have invested significantly in improving the quality of our homes, refurbishing 620 kitchens and 880 bathrooms as well as installing new windows in 420 homes and installing the latest electrical consumer units for 270 residents.

The Association has met the Welsh Housing Quality Standard (WHQS) at 31st December 2012, with all properties where residents have accepted the relevant upgrades being compliant; our investment over the last four years is set out above:

Greener; minimising the impact on the environment by WWH and

Annual Report 2012

Page 7 of 47

Annual report and financial statements our residents

2012 saw the Association focus its efforts on reducing the impact of fuel poverty for residents. 278 properties benefitted from the installation of a new gas supply and modern gas fired heating systems in place of their inefficient and unpopular electric storage heaters, making controllable and more affordable warmth a reality. The Association’s successful partnership with British Gas to deliver these improvements was shortlisted in the Most Innovative Refurbishment Project category in the 2013 National Housing Innovation Awards.

In areas where there is no gas supply we installed 45 state of the art heat pump heating systems, 31 of these being ground source and 14 being air source systems in conjunction with solar thermal panels for hot water. Grant monies were successfully obtained to cover most of the cost of these much needed improvements and the programme to renew heating systems will continue over the next 3 years to cover all homes with electric storage heaters.

During the year the Association spent over £10K on resident led green initiatives across Wales. One example was a group of residents from St Mellons in Cardiff, who worked with WWH to transform an overgrown plot of land into a thriving community garden. Volunteer gardeners cleared the site of weeds and deep roots, painted the fence and laid a new garden path through the centre of the garden. WWH worked with its community partners and fellow housing associations, who all contributed towards the development of the St Mellons Community Garden. Native Welsh fruit trees that should thrive in this environment have been sourced and residents are looking forward to a bumper harvest.

The Association’s environmental management system retained its Green Dragon Level 2 accreditation during 2012 and February saw the installation of a 34 kW PV system on our main office in Cardiff generating nearly 25,000kWh during the year, providing the office with 7% of its annual energy needs in just 10 months of operation. This enabled the Cardiff office to cut its carbon emission from energy consumption by over 15,000kg of carbon on the previous year. In addition, the electricity that was purchased by the Association was sourced from renewable and low carbon sources via a green tariff. The Cardiff office also managed to cut its water consumption by 413 cubic metres or 14% on the previous year and the Flint office cut electricity consumption by over 8%, gas consumption by 17% and water consumption by 33%.

Wiser; making the best use of our assets

Annual Report 2012

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Annual report and financial statements Our properties

We manage 9,558 units of housing stock in 12 different local authority areas across Wales.

The vast majority of our stock is let at social housing rents, which are below market rents.

An analysis of our stock by type is set out below:

Number of properties 126 90

58

595

Social housing ‐ general needs

598

Social housing ‐ older persons Supported housing 2,276

Extra care 5,815

Other housing Owner occupied ‐ right to buy Owner occupied ‐ retirement housing

The average occupancy rate remained high at 99.0% (2011; 99.1%) which is testament to the quality of our stock and good performance in turning around empty properties.

We are clear that we wish to work in local authority areas where we can make a difference.

Where we have a small number of properties in a local authority area then it is difficult for us to make that difference and therefore we have sold on these properties to local housing associations that are better able to add value. We have then re‐invested the proceeds into new developments where we already have a high concentration of stock. As a result of these disposals we no longer have a presence in Carmarthenshire, Ynys Mon or Gwynedd, and in January 2013 we also sold our stock in Ceredigion.

Fire Safety

During 2012 we entered into an innovative partnership with South Wales Fire and Rescue Service (SWFRS) to help promote good practice within fire safety in the social housing sector. This is the first time in Wales that a housing association and the fire service have collaborated to showcase good practice. We have also been instrumental in setting up the Wales Regional Social Housing Fire Safety Strategy Group which will be a working group acting as the voice of housing associations in Wales when it comes to fire safety. This group has the potential to influence how fire safety regulations are interpreted in our sector, both in Wales and in other parts of the UK, by feeding into the recently formed National Social Housing Fire Strategy group (NSHFSG) and directly to Government in England and Wales.

Smarter; making the best use of technology

Annual Report 2012

Page 9 of 47

Annual report and financial statements Digital inclusion

During 2012 the Association undertook a Digital Inclusion pilot at Ty Pontrhun in Merthyr Tydfil which went live in July. With the use of an individual password, residents and their families can access the internet from any room within the building with a Wi‐Fi ready device, taking advantage of up to 2Mb of Wi‐Fi broadband. Digital technology classes are provided for residents and on‐going support is provided should they experience any access problems. The aim of the pilot is to understand how best to provide digital inclusion as part of our landlord services for residents in retirement schemes who may have been unable to afford to access the internet at market prices.

As we are learning from this work, residents are receiving a period of free connection followed by an affordable weekly payment amount. For this small amount residents will now be able to make financial savings by shopping online, keep in contact with relatives and access the many other benefits the internet has to offer. Initial response from the residents is positive and a number have already purchased quality refurbished computers and laptops to make the most of the new service. A further pilot is now underway at our Nant y Mor extra‐care scheme, Prestatyn.

Across the business we have begun to use text messaging to contact individual residents, and more recently with additional technological capability, small groups of residents, and staff. Areas of work involving texting residents have included chasing up problematic direct debit payments, promoting a fun day, and promoting job opportunities on our website.

Telecare and out of hours

We have increased our efforts to grow the telecare, emergency alarm and out of hours services provided by our customer services centre over the last two years. As well as providing a 24 hour telecare and emergency alarm service to our retirement scheme residents, we provide services to a number of other housing associations. We have been successful in adding further contracts for firstly an out of hours service for Bron Afon Housing Association and secondly an emergency alarm and telecare package for Newydd Housing Association. These add to the four external contracts we were already operating, taking the total number of homes monitored to close to 5,200. We are now providing an out‐of‐hours service to more than 23,000 homes.

Together; working with residents and communities to make

Annual Report 2012

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Annual report and financial statements a difference

Resident satisfaction

Everything we do is about making a difference to people’s lives, homes and communities. It is therefore important to understand what matters to our residents and what they think of the service we provide. We previously carried out resident satisfaction surveys every three years with all of our residents surveyed. We now carry out resident satisfaction surveys annually with one third of our residents being surveyed every year. The results of our second annual survey in 2012 showed our highest ever level of customer satisfaction. These are compared with previous surveys, as set out below:

Resident satisfaction 100% 90% 80% 70% 60% 50% 40% 2004

2007

2011

2012

Making a difference

2012 saw the Association’s fifth annual Making a Difference Awards (MAD), which are our way of honouring the community spirit shown by so many people who live in our homes.

Many of the media stories about housing association residents paint a bleak picture, but we know that the reality is different and therefore the awards are our way of recognising their contribution. In all, 10 awards were presented on the night, in categories including good neighbour, local hero and community project. The winners on the night are pictured above.

For the work done in recognising these achievements our PR and Marketing team also received an award. Our MAD event earned us first place by Community Housing Cymru’s PR Network as Best Event in Wales 2012.

Annual Report 2012

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Annual report and financial statements Our organisation

Our people

We were pleased to be awarded 7th place on The Sunday Times list of the 100 Best Places to Work list from throughout the UK in the not for profit sector in early 2013 based on their 2012 survey. This made us the highest placed Welsh company on the list. Companies are accredited between zero and three stars and we retained the highest level with three stars.

We were also runners up from throughout the UK in the Wellbeing special award, demonstrating how our flexible working arrangements are appreciated throughout our organisation.

In September 2012, in recognition of our supportive employment practices for working families, we were delighted not only to have been recognised again as one of the top 30 employers in the UK for effective working family practices, but we also won the special award as Best for Career Progression for Flexible Workers. In addition to this we were also shortlisted for 3 further special awards, in the categories for Carers and Eldercare, Innovation and Engagement.

During May 2012 we underwent our reassessment of IiP and decided to be assessed against the whole framework which consisted of 196 elements. We were delighted and very proud to have achieved Gold, the highest level within the framework.

We became the first housing association in Wales to introduce the ‘Living Wage’. The Living Wage is calculated annually by the Centre for Research in Social Policy at Loughborough University as a rate that will provide an acceptable standard of living. Over 40 people were affected by this positive change seeing a rise in their pay from August.

We continue to support all staff with learning and development activities. During 2012 we co‐ordinated 231 topics across a range of learning activities, and a further 25 individuals are undertaking professional qualifications. Our recruitment process saw 38 individuals appointed to positions during 2012, of which 20 were filled by internal candidates and 18 externally. Our sickness and absence rates continue to fall, from 4.7% in 2009 to 3.6% in 2011 and 2012. There has been an average of 339 total staff in the Association in 2012, compared to 336 in 2011. In addition we have an unpaid Board of 12 volunteers.

Annual Report 2012

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Annual report and financial statements Our finances

The overall financial result was a surplus for the year of £6.5million (2011 ‐ £7.9million). An analysis of the results compared with 2010 and 2011 is set out below:

I&E Account 2010‐2012 40 35 30

£m

25 20

2010

15

2011

10

2012

5 ‐

In both 2011 and 2012, the surplus figure has been improved by surpluses made on the disposal of outlying schemes to other housing associations.

Rent and service charges from our properties account for virtually all of our revenue streams and cash inflow, as set out below for the last three years:

£m

Total group income 40 35 30 25 20 15 10 5 ‐

Other Service Charge Rent

2010

2011

2012

There was a 6.0% increase in rental income, mainly driven by the permitted regulatory increase in April 2012 and increased property numbers.

Annual Report 2012

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Annual report and financial statements Our total costs (including both capital spend, such as on development, component replacements and office / IT equipment, and costs contained within the income and expenditure account) have increased due to increased investments in property developments and component replacements. However our increase in operating costs has remained below the increase in income. An analysis of our total costs (and cash outflows) is set out below:

An explanation of the costs is as follows:

     

   

Other includes a total of £20,200 (2011; £16,322) donated to charities comprising three Care and Repair agencies and match funding to a range of charities supported through staff initiatives.

Premises represent the costs of the Cardiff and Flint offices.

Capital expenditure is comprised of replacement of site assets such as lifts and CCTV systems, expenditure on our premises and IT equipment.

Major repairs are works such as boundaries, footpaths and communal areas which are charged as costs to the Income and Expenditure account as they arise.

Interest represents the net interest payable arising on our borrowings.

Site services comprise services such as emergency alarm, scheme manager support, cleaning and gardening. Certain services, principally emergency alarm related, are also provided to other persons, including residents of several other housing associations. The Association seeks to recover all site service direct costs, together with management charges to cover administrative costs, through service charges.

Routine maintenance comprises day to day repairs and annual servicing People costs are comprised of staff salaries, employer national insurance, pensions, expenses and training.

Property component replacements such as new kitchens, bathrooms and windows are capitalised in our balance sheet.

Property development represents the gross expenditure (before grant) of developing new properties. These are also capitalised in our balance sheet.

Annual Report 2012

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Annual report and financial statements As at 31 December 2012, the Association had borrowings of £105m compared to £93m at 31st December 2011. However the total interest cost in 2012 was lower than in 2011 at £4.5m compared with £4.6m. This has been partly due to careful management of the loan portfolio, with a larger proportion of loans at variable rates to take advantage of the lower interest rate environment, and partly because the Association has paid off expensive inflation linked loans and replaced them with long term fixed rate bond funding. There was an exceptional cost of £0.7m to repay these loans but the expectation is that the net present value of the long term interest saving will be greater than the penalty paid on this early redemption. The average interest rate on the total loan portfolio was 4.7% (2011; 5.0%).

The Association’s loans have maturity dates ranging from 2026 to 2042. Some loans currently require regular principal repayments, others will require regular repayments commencing at future dates, and three loans are repayable in full in one go at maturity (£7.5m in 2031, £9.0m in 2035 and £20.0m in 2042). Principal loan repayments due in 2013 amount to £2.1m. As at 31 December 2012 the Association had in place £9.5m of confirmed bank facility to call upon under a long‐term loan agreement, and £9.4m of cash and short term deposits of less than three months.

During 2012 further loan facilities were negotiated to repay both our index linked loans and to ensure that there would be sufficient funds to continue developments. Further facilities are in the process of being finalised in 2013 to continue this development growth.

The Association is operating within loan covenants. The method of calculating the interest cover covenant has changed during the year, as agreed with our lenders, in order to put the covenant on the same footing post component accounting as it was pre component accounting. The three year rolling method of calculation continues to allow for transfers from the major repairs designated reserve, which aids covenant compliance in years of high component replacement expenditure. In 2012 a transfer of £2.5m was made from this reserve to the revenue reserve due to the high levels of component replacements in the last three years. Under the most onerous lender covenant, our interest cover is 114%. Our gearing (loan as a percentage of the sum of reserves and Social Housing Grant liability) as at 31 December 2012 was 37%. With less Social Housing Grant available to part fund future development, gearing will rise more quickly than it otherwise would. The Association is nevertheless able to continue with its development plans and remain compliant with loan covenants for the foreseeable future.

As part of the new Welsh Government (WG) regulatory framework all housing associations with at least 250 units in management are subject to a regulatory financial review and are issued with a financial viability judgement. We received a “pass” judgement which is the highest rating awarded to associations or groups that are adequately resourced to meet current and future business and financial commitments.

Annual Report 2012

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Annual report and financial statements

2011 The Association uses the metric of £m free cash inflow to measure its ability to generate sufficient cash to meet all Free Cash (0.1) 0.7 of its non‐development activities Net development spend (6.3) (4.6) without the need for further Sale of properties 1.6 2.9 borrowing. A free cash flow surplus was achieved in 2011 and a small free Cash outflow before financing (4.8) (1.0) cash deficit was made in 2012 due to Loans repaid (inc. penalty) (13.2) (2.9) increased component replacement Loans drawn down 23.9 6.5 spend to meet WHQS compliance.

Positive values are required in the Net Cash Inflow 5.9 2.6 long term to meet interest cover requirements and principal repayments on loans. Development costs are funded from grant and additional bank and bond based borrowing. In addition, the net proceeds from sales of schemes, where the Association has rationalised its stock, are available for reinvestment in future developments.

Summary representations of the balance sheet as at 31 December 2012 compared with 2010 and 2011 are shown below. There are no reportable post balance sheet events.

2012 £m

Balance Sheet 2010‐2012 400 350 300

£m

250 2010

200

2011 2012

150 100 50 ‐ Housing properties

Social housing grant

Loans

Other

Reserves

The Association annually publishes a five‐year business plan which sets the aims and strategic direction of the Association and is the basis of financial projections for the next 30 years. The current five year plan is published on the Association’s website and shows operating surpluses for each year and total positive free cash flows of £20.3m in the period to 2017.

Annual Report 2012

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Annual report and financial statements Governance

The Association is controlled by a voluntary Board of Management which comprises up to fifteen members. Up to eight members are elected from shareholders, up to four are residents elected directly by residents and up to three may be co‐opted from time to time to fill a skill shortage should one arise. Working together, all Board members guide the Association in the achievement of its aims and objectives. This includes overseeing finances, agreeing policies, monitoring performance, making strategic decisions, developing implementation plans and generally ensuring that all matters are conducted properly. There is a separate Board for Cambria which reports annually to the Association’s Board, to allow the Association’s Board to consider the strategic direction of the Group and to ensure that the affairs of the Group are conducted properly.

The Board leads a robust, evidence based and outcome focused self‐assessment process that is corroborated by the Association’s staff, residents and partners. This is part of the requirements of the regulation of the Association by the Welsh Government (WG), which publishes a set of delivery outcomes and guidance to make clear its expectations of the sector as a whole. The self‐assessment process adopted is an integral part of our approach to service and business planning.

The Association has a well established corporate planning cycle, which takes account of WG’s expected delivery outcomes. Progress against corporate priorities is reviewed quarterly by the Board following presentation of a Strategic, Operational and Financial update which also embraces new challenges and opportunities. A suite of service trend measures are used by the Board to understand the operational effectiveness of the business and the quality of service for residents. The emphasis is on measuring what matters most to residents in terms of outcomes along with indications of the type and frequency of customer demands so that the Board and staff can easily see the changing profile of customer requests.

Board members are not remunerated but are entitled to receive properly authorised expenses when incurred on Association business. A Board member acting in good faith will not be liable to the Association for any loss.

The Board meets on a formal basis approximately every six weeks, including a full day away from the office twice each year to consider the strategic direction and priorities of the Association. A Probity and Audit Committee meets when required, typically three times a year. Some Board members are designated as lead members, where they are expected to develop greater in‐depth knowledge in their lead area to help the Board as a whole.

Ad‐hoc working groups are also established from time to time for special purposes as needs arise. These are referred to as “task and finish groups” and their function is to help the executive management to develop solutions to issues. These groups include a number of Board members and staff, and can also include others such as professional advisors, residents and shareholders who take an active interest in the workings of the Association.

Shareholding Board members

Shareholding Board members are elected to the Board of Management at the Annual General Meeting when nominations exceed available places. They must be either an existing Board member standing for re‐election or be a shareholder nominated by an existing shareholder. Elections are by way of ballot of shareholders utilising postal and in‐ person voting.

Annual Report 2012

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Annual report and financial statements Shareholding Board members (continued)

Shareholders are required to pay a one pound subscription fee and must not be a minor, must not have previously been expelled as a shareholder (unless authorised by a special resolution at a general meeting), and cannot be an employee of the Association.

Shareholders must demonstrate that they can positively contribute to the future management of the Association and are obliged to act in the interests of the Association, for the benefit of the community.

Potential shareholders can obtain more information by writing to the Secretary of the Association.

Resident Board members

The first Resident Board members were elected in 2002 to further enhance resident participation and involvement. As vacancies arise, Association residents have the opportunity to stand for election to the Board of Management, providing that they:

(a) (b) (c)

are not on an Introductory Tenancy; are not bankrupt or subject to an agreement with creditors; have not been convicted of an indictable offence within the last five years.

The Board decides the method of election of Resident Board members. The current system is:

(a)

Prior to the election process commencing, an advert is placed within “In Touch”, the Association’s resident magazine, asking for residents who are interested in becoming Board members. For those who are interested, an “Information Day” is held. Attendance at an Information Day is a compulsory requirement for those wishing to become Resident Board members; (b) Nominations to the Board of Management are requested in advance of the Annual General Meeting from those residents who have attended an Information Day; (c) Interested residents must complete an expression of interest in becoming a Resident Board member form stating how they meet the Board’s requirements in terms of skills, qualities and experience; (d) After attending a meeting with the Chief Executive to receive an explanation of the obligations of a Resident Board member, they must complete a nomination form which includes a statement of 100 words in support of their nomination to be used on the ballot paper; (e) Ten other residents must support the nomination; (f) A postal ballot of all residents is held if nominations exceed available places; (g) Those with the most votes become members of the Board of Management and their appointments are announced at the Annual General Meeting.

Co‐opted Board members

The elected Board can appoint up to three co‐opted members to the Board should the Board at any time determine that there is a need for supplementary skills. Co‐opted members are appointed for a finite period and have the same voting rights as elected Board members save that they are not entitled to vote on matters pertaining to positions of office to the Board or issues affecting shareholders.

Annual Report 2012

Page 18 of 47

Annual report and financial statements All Board members

Members are elected at the Annual General Meeting for a three year term. A maximum of three consecutive terms can be served. There must be a clear 12 month gap following the serving of the three consecutive terms before a member can re‐join the Board in any capacity.

Any period spent as a co‐optee or casual vacancy holder does not count towards the maximum consecutive time.

The collective and personal obligations of Board members are to:

        

Understand and uphold the values and objectives of the Association.

Monitor, supervise and control the Association’s affairs as custodians of its mission.

Act objectively at all times and serve the interests of the Association before their own or the interests of any particular sector of the community served by the Association.

Use independent judgement on strategy, performance and accountability.

Act as an ambassador of the Association at all times.

Ensure that an effective contribution is made by preparing for meetings and events, attending regularly and participating in discussions and decision‐making.

Acknowledge that an objective is to be ‘business‐like’ without turning the Association into a business which trades purely for profit.

Abide by the Association’s rules and code of governance.

Handle key Association appointments.

Statement of the Board’s requirements for the skills, qualities and experience of its members

The Board’s requirements for the skills, qualities and experience of its members are that collectively they must:   

have a balance of appropriate skills including (but not exhaustively) legal, business, financial, technical, community work, housing sector experience, relevant public sector experience, human resources and governance; reflect the communities wherein the Association operates; reflect the diversity of society in terms of a balance of gender, age, minority groups such as BME and disabled.

Individually they must also:

 be able to give the appropriate amount of time necessary to be trained, attend and prepare for meetings;  be able to work within a team and put personal considerations aside;  demonstrate an empathy with social housing.

Extent to which these requirements are met by those Board members continuing in office, and those retiring and intending to re‐offer themselves for election

Following the annual extensive Board appraisal exercise the Board is happy to report that the requirements for the skills, qualities and experience, which it needs from its members, are fully met by those Board members continuing in office, and those retiring and intending to re‐offer themselves for election.

Annual Report 2012

Page 19 of 47

Annual report and financial statements Internal Control

The Board acknowledges its responsibility for ensuring that the Association and the Group have in place a system of controls that are appropriate to the various business environments in which they operate. These controls are designed to give reasonable assurance with respect to:

(a) (b) (c)

the reliability of financial information used within the Association and Group or for publication; the maintenance of proper accounting records ; and the safeguarding of assets against unauthorised use or disposition.

It is the Board’s responsibility to establish and maintain systems of internal financial control.

Such systems can only provide reasonable and not absolute assurance against material financial mis‐statement or loss. Key elements include ensuring that:

(a)

(b)

(c)

(d)

(e) (f)

(g)

formal policies and procedures are in place, including the documentation of key systems and rules relating to the delegation of authorities, which allow the monitoring of controls and restrict the unauthorised use of the Association’s assets; experienced and suitably qualified staff take responsibility for important business functions. Annual procedures have been established to maintain standards of performance, as well as self‐certification of risk control in all areas; forecasts and budgets are prepared which allow the Board to monitor the key business risks and objectives and progress towards financial plans set for the year and the medium term; regular management accounts are prepared promptly, providing relevant, reliable and up‐to‐date financial and other information and significant variances from budgets are investigated as appropriate; all significant new initiatives, major commitments and investment projects are subject to a formal authorisation procedure, through relevant committees comprising Board members and others; the Board undertakes an annual review of the major risks facing the Association and the Group; the Probity and Audit Committee reviews reports from management, the Internal Audit Manager and from the external auditors to provide reasonable assurance that control procedures are in place and are being followed.

Committee makes regular reports to the Board; and formal procedures have been established for instituting appropriate action to correct weaknesses identified from the above reports.

The Board is satisfied that the Association and the Group has adequate resources to continue in operational existence for the foreseeable future and at present sees no reason for the situation to change. The Board is also satisfied that there are no weaknesses in the Association’s system of internal control which might lead to material losses, contingencies or uncertainties which require disclosure in the financial statements or the auditor’s report on the financial statements.

Annual Report 2012

Page 20 of 47

Annual report and financial statements Statement of Board Responsibilities

The Board is responsible for preparing the financial statements in accordance with applicable law and United Kingdom Generally Accepted Accounting Practice.

The Industrial and Provident Societies Acts and Registered Social Landlord legislation requires the Board to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Association and the Group and of the surplus or deficit of the Association and the Group for that period.

In preparing those financial statements, the Board is required to select suitable accounting policies, as described on pages 27 to 30, and then apply them on a consistent basis, making judgements and estimates that are prudent and reasonable. The Board must also prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Association and the Group will continue in business.

The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Association and the Group and to enable them to ensure that the financial statements comply with the relevant legislation.

The Board is also responsible for safeguarding the assets of the Association and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board is responsible for the maintenance and the integrity of the corporate and financial information included 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.

In so far as the Board is aware:



there is no relevant audit information of which the Association's and the Groups auditors are unaware; and



the Board has taken all steps that they ought to have taken to make itself aware of any relevant audit information and to establish that the auditors are aware of that information.

A resolution to re‐appoint Haines Watts Wales LLP as auditors will be proposed at the Annual General Meeting on 23rd May 2013.

By order of the Board

Mrs K Smart

Chair of the Board

Annual Report 2012

Page 21 of 47

Independent Auditor Report to Members of Wales & West Housing Association Limited

Year ended 31 December 2012

We have audited the financial statements of Wales & West Housing Association Limited (‘the Association’) for the year ended 31 December 2012 which comprise the Group Income and Expenditure Account, the Group and Parent Balance Sheets, the Group Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Association’s members, as a body corporate, in accordance with the requirements of the Industrial and Provident Societies Acts 1965 to 2002, schedule 1 to the Housing Act 1996 and the Accounting Requirements for Social Landlords Registered in Wales ‐ General Determination 2009. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the Association’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Board and the auditor

As explained more fully in the Statement of Board’s responsibilities, set out on page 21, 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 Practice Board’s Ethical standards for Auditors.

We review whether the Board’s statement on internal financial control reflects the Groups compliance with the Housing for Wales Circular HFW 02/10 “Internal controls and reporting” and we report whether the statement is not inconsistent with the information of which we are aware from our audit of the financial statements. We are not required to form an opinion on the effectiveness of the Groups corporate governance procedures or its internal financial control.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Association’s circumstances and have been consistently applied and adequate disclosed; the reasonableness of significant accounting estimates made by the Board; and the overall presentation of the financial statements. In addition, we read all the financial and non‐financial information in the Board report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on internal control

In our opinion, with respect to the Board’s statement on internal financial control:



the Board has provided the disclosures required by the Circular and the statement is not inconsistent with the information of which we are aware from our audit work on the financial statements.

Annual Report 2012

Page 22 of 47

Annual report and financial statements

Opinion on financial statements

In our opinion the financial statements:



give a true and fair view of the state of the Group’s and of the parent Association’s affairs as at 31 December 2012 and of the Group’s income and expenditure for the year then ended;



have been properly prepared in accordance with the Industrial and Provident Societies Acts 1965 to 2002, schedule 1 to the Housing Act 1996 and the Accounting Requirements for Social Landlords Registered in Wales ‐ General Determination 2009;

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts 1965 to 2002 require us to report to you if, in our opinion:

   

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

Haines Watts Wales LLP Statutory Auditor Pagefield House 24 Gold Tops Newport South Wales NP20 4PG

Annual Report 2012

Page 23 of 47

Income and expenditure account for the year ended 31 December

GROUP ASSOCIATION 2012 2011 2012 2011 £’000 £’000 £’000 Notes £’000 Turnover Continuing operations

2

38,268

36,063

38,268

36,063

Operating costs Continuing operations

2

(27,883)

(25,632)

(28,165)

(25,786)

Operating surplus

4

10,385

10,431

10,103

10,277

Exceptional item Surplus on sale of fixed assets Gift aid Interest receivable and similar income Interest payable and similar charges Surplus on ordinary activities before taxation Taxation

5 6 9 10

(708) 1,282 0 79 (4,545)

0 2,091 0 8 (4,590)

(708) 1,282 334 85 (4,545)

0 2,091 115 14 (4,590)

11

6,493 (1)

7,940 (4)

6,551 0

7,907 0

Surplus for year transferred to reserves

22

6,492

7,936

6,551

7,907

The Group has no recognised gains and losses other than the surplus above and therefore no separate statement of total recognised gains and losses has been presented.

There is no difference between the surplus on ordinary activities before taxation and the retained surplus for the year as stated above and their historical cost equivalents.

Reconciliation of movements in net assets for the year ended 31 December

Surplus for the year Opening net assets as previously reported

2012 £’000 6,492 28,290

GROUP 2011 £’000 7,936 20,354

ASSOCIATION 2012 2011 £’000 £’000 6,551 7,907 28,261 20,354

Closing net assets

34,782

28,290

34,812

28,261

Annual Report 2012

Page 24 of 47

Balance sheet at 31 December

Notes

2012 £’000

GROUP 2011 £’000

ASSOCIATION 2012 2011 £’000 £’000

Tangible fixed assets Housing land and buildings – gross cost Less: Social Housing grants Other grants Depreciation

12 13a 13b 13c

413,715 (246,074) (2,163) (36,402) 129,076

392,606 (235,323) (1,037) (35,068) 121,178

413,760 (246,074) (2,163) (36,402) 129,121

392,606 (235,323) (1,037) (35,068) 121,178

Fixed asset investments Equity loans Less: grants

15a 15b

Other tangible fixed assets

16

3,947 (3,629) 318 4,233

430 (352) 78 4,255

3,947 (3,629) 318 4,193

430 (352) 78 4,203

Total fixed assets Current assets Debtors: amounts falling due within one year Cash at bank and in hand

133,632 125,459

3,302 5,143 10,521 4,316 13,823 9,459 (10,117) (16,191) 3,706 (6,732) 137,333 118,779

3,707 5,353 10,079 4,173 13,786 9,526 (10,060) (16,239) 3,726 (6,713) 137,358 118,746

(102,378) (90,365) (173) (124) 34,782 28,290

(102,378) (90,365) (168) (120) 34,812 28,261

17 25

Creditors: amounts falling due within one year 18 Net current assets/(liabilities) Total assets less current liabilities Non‐current liabilities Creditors: amounts falling due after more than one year 19 20 Provisions for liabilities and charges Capital and reserves Called up share capital Special reserve Major repairs designated reserve Revenue reserve Total capital and reserves

133,627 125,511

21 22 22 22

0 131 7,380 27,271 34,782

0 131 9,880 18,279 28,290

0 131 7,380 27,301 34,812

0 131 9,880 18,250 28,261

The financial statements on pages 24 to 47 were approved by the Board on 17th April 2013 and were signed on its behalf by:

Chair of the Board – Mrs K Smart

Vice Chair of the Board – Mr A Ashton

Secretary – Mrs A Hinchey

Annual Report 2012

Page 25 of 47

Cash flow statement for the year ended 31 December

Notes Net cash inflow from operating activities 23 Interest received Interest paid Net cash outflow from returns on investment and servicing of finance

Purchase and development of properties Grant received Property component replacements Purchase of other fixed assets Proceeds of sale of properties and other fixed assets Net cash outflow from capital expenditure and financial investment

GROUP 2012 2011 £’000 £’000 13,633 14,035

ASSOCIATION 2012 2011 £’000 £’000 13,371 14,016

19 (4,537)

8 (4,069)

19 (4,537)

14 (4,069)

(4,518)

(4,061)

(4,518)

(4,055)

(18,314) (11,832) 12,031 7,225 (8,607) (8,103) (302) (1,177) 1,562

2,879

(13,630) (11,008)

Net cash outflow before financing Exceptional Item

(18,314) (11,832) 12,031 7,225 (8,652) (8,103) (294) (1,104) 1,562

2,879

(13,667) (10,935)

(4,515)

(1,034)

(4,814)

(974)

(708)

0

(708)

0

6,500 (2,966) 3,534

23,921 (12,493) 11,428

6,500 (2,966) 3,534

2,500

5,906

2,560

Housing loans received Housing loans repaid Net inflow from financing activities

24

23,921 (12,493) 11,428

Net increase in cash

24

6,205

Annual Report 2012

Page 26 of 47

Notes to the financial statements for the year ended 31 December

1

Principal accounting policies

A summary of the more important accounting policies are set out below.

Format of accounts

The financial statements have been prepared in accordance with applicable financial reporting standards in the United Kingdom, including the Statement of Recommended Practice (SORP) for “Accounting by Registered Social Housing Providers” as updated in 2010, and comply with the Accounting Requirements for Social Landlords registered in Wales General Determination 2009.

Basis of accounting

The financial statements are prepared on the historical cost basis of accounting.

Basis of consolidation

The consolidated accounts include the results of Wales & West Housing Association Ltd and its trading subsidiary undertaking, Cambria Maintenance Services Ltd. There are two further subsidiary undertakings, Enfys Developments Limited and Castell Homes Limited which did not trade during the year. Consolidated accounts are required under the Industrial and Provident Act 1968. Wales & West Housing Association Ltd is the parent entity and the ultimate parent entity.

Where any conflict arises between the SORP 2010 and applicable financial reporting standards, then the SORP prevails.

Turnover

Turnover represents rental and service charge income net of empty properties, fees and revenue based grants receivable. All turnover is derived from United Kingdom operations.

Housing properties – fixed asset capitalisation and depreciation

Housing properties are stated at cost. The cost of properties is their purchase price together with incidental costs of acquisition and direct costs of the development process. Where properties come into the ownership of the Association under section 106 agreements, these are often purchased at below cost price. Where this is the case the cost is grossed up to the true cost and the cost difference shown as imputed cost which is shown within property acquisitions, with the corresponding balance shown as imputed grant.

"Housing properties in the course of construction" are stated at cost and are transferred into "social housing properties" when completed. Any overhead costs directly attributable to bringing fixed assets into their working condition for their intended purpose are capitalised. Expenditure on the initial purchase of land and buildings is capitalised and disclosed as part of housing properties in the course of construction. Interest on borrowings attributable to the net investment in a property during the course of construction is capitalised.

Profits or losses on disposals of properties are recognised as at the date a sale becomes certain.

The profit or loss arising on a disposal of a property is the difference between the sale price and the aggregate of the depreciated cost, and any associated costs of disposal such as legal and valuation fees. The grant originally received on a property is repayable in full in the case of a disposal, demolition or change of use to an ineligible activity, save that in circumstances where the Welsh Government considers appropriate it may reduce the amount repayable. Where this arises on a disposal, the grant repayable so waived is added back to the profit or loss on that disposal.

Annual Report 2012

Page 27 of 47

Notes to the financial statements (continued) for the year ended 31 December

1

Principal accounting policies (continued)

Housing properties – fixed asset capitalisation and depreciation (continued)

Some residents have rights under their tenancy agreement to purchase their homes at prices which are at a discount to the open market price. Some properties have been partially sold under shared ownership arrangements. Occupiers have full use of the properties concerned and pay a rent which reflects the proportional interest retained by the Association. In the balance sheet the Association’s interest is shown as a proportion of the original historic cost, corresponding to the interest retained. Occupiers are able to purchase some or all of that retained interest at a corresponding proportion of the current market value when that transaction arises.

Depreciation is charged on the historic cost of property components after deducting grants. Grant is allocated to land and the main structure of the property, but not to other components. Freehold land is not depreciated. Leasehold land is depreciated over the remaining term of the leases. The depreciable amount is written off over the estimated useful lives from the date of purchase/build.

Where a housing property comprises two or more major components with substantially different useful economic lives, each component is accounted for separately and depreciated over its individual useful economic life. Expenditure relating to the subsequent replacement or renewal of components is capitalised as incurred. Deprecation is charged on cost on a straight line basis over the component’s expected economic useful life as follows:

years

House main structure

150 Flat main structure

100

Other components:

years

years Back doors

40 Bathrooms

30

Boilers

15 Electrics

60 Front doors

30 Kitchens: general needs

17 Kitchens: retirement housing 20 Roofs

80 Windows: installed pre 2000 20 Windows: installed post 2000 40

Components on leasehold land are depreciated over the shorter of the above and the remaining period of the lease.

Grants

Where developments have been financed wholly or partly by grants, the cost of these developments has been reduced by the amount of the grant received. These grants are received from central government agencies and local authorities and are offset against the cost of housing properties on the face of the balance sheet. The Companies Act 2006 requires tangible fixed assets to be included at purchase price, or production cost, less any provision for depreciation or diminution in value.

However, this requirement conflicts with the generally accepted accounting principles for Registered Social Housing Providers set out in the SORP: Accounting by Registered Social Housing Providers. The purpose of grants is to subsidise the capital cost of affordable housing. Accordingly, management consider it necessary to adopt the accounting treatment set out in the SORP to give a true and fair view. Grants are allocated proportionally against the historic cost of the land and main structure component of each property. No grant is allocated to other property components.

Annual Report 2012

Page 28 of 47

Notes to the financial statements (continued) for the year ended 31 December

1

Principal accounting policies (continued)

Grants (continued)

Where grants are received in advance they are carried forward as current liabilities to be matched against future capital expenditure as it is incurred. Grant receivable in respect of completed schemes or those under construction is included as a debtor in the financial statements.

Grants are repayable under certain circumstances, primarily following the sale of a property. Such repayable grants are included within creditors in the balance sheet.

Repairs and maintenance

The costs of repairs and maintenance are expensed as incurred on the basis of work done at the balance sheet date.

Impairment

Housing properties are annually reviewed for impairment. Where there is evidence of impairment, housing properties are written down to their recoverable amount.

Fixed assets – investments

Equity loans have been made, under low cost home ownership arrangements, to homeowners who were not otherwise able to fully afford their homes using commercially available mortgages.

Equity loans are included in the balance sheet at historic cost. The Association is entitled to a proportion of the market value corresponding to the equity interest at a time when homeowners either dispose of their property or when they choose to repurchase some, or all, of the equity loan.

Other fixed assets and depreciation

Other tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is charged on a straight line basis so as to write off the cost less estimated residual value of assets over their expected useful economic lives as follows:

Motor vehicles Office equipment Site equipment Office buildings

3 years 3 to 10 years 3 to 10 years written off over periods up to 60 years

Reserves

A major repairs designated reserve is held to fund future major repairs to the housing stock of the Association. Transfers to and from the reserve are determined by the Board.

Pension costs

The Group makes payments to defined benefit pension and defined contribution schemes on behalf of its employees. The schemes are funded by contributions partly from the employees and partly by the Group at rates determined by independent actuaries. The assets of the defined benefit schemes are invested separately from the Group assets in independently administered multi‐employer funds.

All pension costs have been calculated as if they arose within defined contribution schemes, as permitted by Financial Reporting Standard 17 (Retirement Benefits), as it is not possible to separately identify the scheme assets attributable to the Group on a consistent and reasonable basis.

Annual Report 2012

Page 29 of 47

Notes to the financial statements (continued) for the year ended 31 December

1

Principal accounting policies (continued)

Operating leases

Costs in respect of operating leases are amortised on a straight line basis over the lease term.

Value added tax

The Group is partially exempt for VAT purposes, and claims are made for repayment of VAT on items that are specifically allowable. Expenditure is shown inclusive of irrecoverable VAT.

Taxation

The Association adopted charitable rules with effect from 20 January 2005. No corporation tax is expected to arise after that date on charitable object activities. The remaining members of the group are liable to Corporation Tax at the prevailing rate of taxation.

Loans

Loan arrangement fees are capitalised and are amortised on a straight line basis over the duration of the loans. Interest is recognised in the income and expenditure account under the accruals principle, including that related to index linked loans where the cash settlement may be deferred.

Sinking fund deferred income

Certain residents are required to contribute towards the costs of maintaining properties. Monies received in advance of maintenance expenditure are credited to sinking fund deferred income accounts, to which interest is applied.

Provisions

Provisions are recognised where uncertainty exists in relation to the timing or amount that may be required to settle potential liabilities. Any amounts provided are charged to the Income and Expenditure account and credited to the Balance Sheet based upon the Group’s best estimate of potential liabilities.

2

Analysis of turnover and costs

(a)

Particulars of turnover, operating costs and operating surplus ASSOCIATION Operating Operating Operating Operating Turnover costs surplus Turnover costs surplus 2012 2012 2012 2011 2011 2011 £'000 £'000 £'000 £'000 £'000 £'000

Social housing lettings

36,755

(26,568)

10,187

34,654

(24,357)

10,297

Non‐social housing activities Lettings Other Total

205 1,308 38,268

(134) (1,463) (28,165)

71 (155) 10,103

114 1,295 36,063

(98) (1,331) (25,786)

16 (36) 10,277

Annual Report 2012

Page 30 of 47

Notes to the financial statements (continued) for the year ended 31 December

Analysis of turnover and costs (continued)

(a)

Particulars of turnover, operating costs and operating surplus (continued)

The analysis above represents the results of Wales & West Housing Association Limited, which is the only registered housing provider in the Group. The other trading member of the Group, Cambria Maintenance Services Limited, contributed a further £282k (2011: £154k) to the operating surplus, taking the Association reported operating surplus of £10,103k (2011: £10,277k) to the Group reported operating surplus of £10,385k (2011: £10,431k).

A detailed analysis of the social housing turnover and related operating costs is provided in note 2(b).

(b)

Particulars of income and expenditure from social housing lettings

ASSOCIATION General Other social needs and housing sheltered Supported letting housing housing income 2012 Total 2011 Total £’000 £’000 £’000 £’000 £’000 Income Rent receivable Service charge income Grant income for support services Other revenue grants Turnover from social housing lettings Operating costs Management Service charges Routine maintenance Major repairs expenditure Bad debts Depreciation of housing properties Other costs Operating costs on social housing activities Operating surplus on social housing lettings Memorandum information: Rent foregone due to properties being vacant

31,505 4,347 351 42

464 0 0 0

46 0 0 0

32,015 4,347 351 42

30,029 4,212 352 61

36,245

464

46

36,755

34,654

(5,355) (4,653) (8,067) (3,310) (281) (3,845) (796)

(59) 0 (89) (36) 0 (42) (9)

(16) 0 (4) (2) 0 (2) (2)

(5,430) (4,653) (8,160) (3,348) (281) (3,889) (807)

(5,070) (4,576) (7,472) (2,846) (218) (3,327) (848)

(26,307)

(235)

(26)

(26,568)

(24,357)

9,938

229

20

10,187

10,297

337

0

0

337

330

Annual Report 2012

Page 31 of 47

Notes to the financial statements (continued) for the year ended 31 December

3(a) Directors' emoluments

The remuneration paid to the directors (defined as members of the Board and the Executive Officers) of the Group and Association was: GROUP & ASSOCIATION 2012 2011 £’000 £’000 Aggregate emoluments of executive officers 298 303 Aggregate emoluments of Board members 0 0 Emoluments of highest paid director (Chief Executive), excluding pension 119 114 contributions

Retirement benefits are accruing under defined benefit schemes. The Chief Executive is an ordinary member of a contributory pension scheme (Cardiff and Vale of Glamorgan Pension Fund). No enhancement or special terms apply and the Association makes no contribution to any individual pension arrangement. The accrued pension and the accrued lump sum (comprising contributions from both employee and employer) in respect of the highest paid director (Chief Executive) at 31 December 2012 were £42,734 (2011: £39,164) and £100,479 (2011: £96,473) respectively.

GROUP & ASSOCIATION 2012 2011 £’000 £’000 Expenses reimbursed to directors not chargeable to United Kingdom taxation for the year ended 31 December

20

14

3(b) Employee information

The average number of staff (including executives) employed during the year was:

GROUP 2012 2011 Staff Staff Actual 384 371 326 317 Full time equivalent

Staff costs (for the above persons): Wages and salaries Social security costs Pension costs

ASSOCIATION 2012 2011 Staff Staff 339 336 286 283

2012 £’000

2011 £’000

2012 £’000

2011 £’000

8,743 684 969 10,396

8,148 663 917 9,728

7,810 600 965 9,375

7,490 605 913 9,008

4

Operating surplus Annual Report 2012

Page 32 of 47

Notes to the financial statements (continued) for the year ended 31 December

Operating surplus is stated after charging: Depreciation Bad debts Auditors' remuneration: ‐ In their capacity as auditors ‐ In respect of other services Operating lease rentals ‐ Land and buildings ‐ Other assets

5

GROUP 2012 2011 £’000 £’000

ASSOCIATION 2012 2011 £’000 £’000

4,557 281

4,268 239

4,537 281

4,248 239

24 14

26 13

24 9

26 7

68 36

54 37

68 36

54 37

Exceptional Item

Penalty paid on early redemption of index linked loans

GROUP 2012 2011 £’000 £’000 708 0

ASSOCIATION 2012 2011 £’000 £’000 708 0

During the year the Association repaid its two indexed linked loans before their normal repayment date. These loans were refinanced by a long term 30 year bond and the expectation is that the net present value of the long term interest saving will be greater than the penalty paid on this early redemption.

6

Surplus on sale of fixed assets GROUP & ASSOCIATION 2012 2011 £’000 £’000

Sales proceeds: Housing properties Cost of sales: Housing properties Surplus on sale of fixed assets

7

1,567 1,567

2,879 2,879

(285) (285) 1,282

(788) (788) 2,091

Contingent liabilities

The Association is a participating employer member of the Pension Trust’s Growth Plan. This is a multi‐employer pension scheme, which is in most respects a money purchase arrangement but it also has some guarantees. Employees of the Association have participated in the Growth Plan primarily through the use of additional voluntary contributions (AVCs). In accordance with the Occupational Pension Schemes (Employer Debt on Withdrawal) Regulations 2005, a potential debt can arise on employers that participate in the Growth Plan. The debt will only crystallise in the event that the Association ceases to participate in the scheme or in the event of the scheme winding up at

7

Contingent liabilities (continued)

Annual Report 2012

Page 33 of 47

Notes to the financial statements (continued) for the year ended 31 December

a time when it is not fully funded on a buy‐out basis. The Association has been notified by the Pensions Trust that the estimated employer debt on withdrawal from the plan based on the financial position of the plan as at 30 September 2011 was £0.4million. Similarly an employer debt could arise on withdrawal from the Association’s main final salary pension scheme arrangements through the Social Housing Pension Scheme (SHPS) and the Cardiff and Vale of Glamorgan Pension Fund. The estimated employer debt for the Association on withdrawal from the SHPS plan based on the financial position of the scheme as at 30 September 2011 was £30.8million and from the Cardiff and Vale of Glamorgan Pension Fund as at 31 March 2007 was £1.1million. As events which could crystallise the debt are unlikely to arise in the foreseeable future, no provision is deemed necessary.

8

Impairment of asset values

In 1989 the Association acquired land from a university under a 125 year lease, on which it constructed a hall of residence, which was then leased back to that university, also on a 125 year lease. The building was constructed at a cost of £1,422,000 and was originally funded by £826,000 of Housing Association Grant (HAG) and a mortgage loan of £596,000. Over the loan mortgage period to 2026, the contractual arrangement with the university will ensure that the Association will recover its operating costs before depreciation relating to the hall of residence, together with an amount equivalent to the Association’s net of HAG investment of £596,000. After the loan mortgage period expires there is uncertainty as to whether the income receivable from the university relating to the hall of residence over the remaining term of the lease will exceed the operating costs by at least £826,000, being the balance of the gross investment in the property.

There is also uncertainty as to how much of the £826,000 of HAG received, if any, will become repayable at the time ownership of the property reverts to the university and how much will be waived from repayment by the Welsh Government and be available to offset any residual balance of gross investment in the property. Although there is uncertainty, it is not currently envisaged that a material write off of the investment will be necessary when the lease arrangements expire, and accordingly no impairment of the investment in this leased asset is deemed necessary at the present time.

9

Interest receivable and similar income

Interest receivable from investments

GROUP 2012 2011 £’000 £’000 79 8

ASSOCIATION 2012 2011 £’000 £’000 85 14

GROUP 2012 2011 £’000 £’000

ASSOCIATION 2012 2011 £’000 £’000

10

Interest payable and similar charges

On bank loans and overdrafts and other loans: Repayable wholly or partly in more than 5 years Interest payable to sinking funds

11

(4,544) (1) (4,545)

4,582 8 4,590

(4,544) (1) (4,545)

Corporation Tax

Annual Report 2012

Page 34 of 47

4,582 8 4,590

Notes to the financial statements (continued) for the year ended 31 December

GROUP 2012 2011 £’000 £’000

ASSOCIATION 2012 2011 £’000 £’000

Deferred Tax Origination and reversal of timing differences

1

4

0

0

Tax on ordinary activities

1

4

0

0

The Association adopted charitable status with effect from 20 January 2005 and therefore no taxation is payable on the profits arising from the charitable activities it undertakes. Cambria Maintenance Services Limited is liable to UK corporation tax but the current taxable profits have been reduced to £nil by a gift aid payment to the Association as its parent company. A deferred tax liability has arisen in Cambria and has been provided for in full.

12 Tangible fixed assets – Housing land and buildings – gross cost GROUP Social Properties in Housing Shared Other the course of Properties ownership Properties construction Total £’000 £’000 £’000 £’000 £’000 At 1 January 2012 379,162 564 2,362 10,518 392,606 Property acquisitions 4,830 0 0 14,974 19,804 Schemes completed 2,567 0 0 (2,567) 0 Reclassification to investments (3,372) 0 0 0 (3,372) Component additions to existing properties 8,782 9 0 0 8,791 Components removed (2,408) (3) 0 0 (2,411) (1,686) (17) 0 0 (1,703) Housing property disposals At 31 December 2012

387,875

553

Housing properties comprise: Freehold land and buildings Long leasehold land and buildings Short leasehold land and buildings

2,362

22,925

413,715

2012 £’000

2011 £’000

385,622 28,026 67

364,914 27,625 67

413,715

392,606

12 Tangible fixed assets – Housing land and buildings – gross cost (continued)

Annual Report 2012

Page 35 of 47

Notes to the financial statements (continued) for the year ended 31 December

ASSOCIATION Properties in Social Housing Shared Other the course of Total Properties ownership Properties construction £’000 £’000 £’000 £’000 £’000 At 1 January 2012 379,162 564 2,362 10,518 392,606 Property acquisitions 4,830 0 0 14,974 19,804 Schemes completed 2,567 0 0 (2,567) 0 Reclassification to investments (3,372) 0 0 0 (3,372) Component additions to existing properties 8,827 9 0 0 8,836 Components removed (2,408) (3) 0 0 (2,411) Housing property disposals (1,686) (17) 0 0 (1,703) At 31 December 2012

387,920

553

2,362

Housing properties comprise: Freehold land and buildings Long leasehold land and buildings Short leasehold land and buildings

22,925

413,760

2012 £’000

2011 £’000

385,667 28,026 67

364,914 27,625 67

413,760

392,606

Works charged to existing properties that have been capitalised are shown above under component additions to existing properties, works charged through the Income and Expenditure account during 2012 amounted to £1,965,000 (2011; £1,474,000).

13(a) Tangible fixed assets ‐ Social housing grants

At 1 January 2012 Property acquisitions Schemes completed Reclassification to investments Housing property disposals At 31 December 2012

Social Housing Shared Properties ownership £’000 £’000 230,210 389 1,323 0 1,568 0 (3,136) 0 (1,344) (12) 228,621

377

GROUP & ASSOCIATION Properties in Other the course of Total Properties construction £’000 £’000 £’000 826 3,898 235,323 0 15,134 16,457 0 (2,782) (1,214) 0 0 (3,136) 0 0 (1,356) 826

16,250

Grant received or receivable to date is wholly attributable to capital works.

13(b) Tangible fixed assets ‐ Other grants

Annual Report 2012

Page 36 of 47

246,074

Notes to the financial statements (continued) for the year ended 31 December

At 1 January 2012 Internal movement Imputed grant

Social Housing Shared Properties ownership £’000 £’000 562 0 (80) 0 1,126 0

At 31 December 2012

1,608

0

GROUP & ASSOCIATION Properties in Other the course of Properties construction Total £’000 £’000 £’000 0 475 1,037 0 80 0 0 0 1,126 0

555

2,163

13(c) Tangible fixed assets – Housing land and buildings – Depreciation

At 1 January 2012 Charge for the year Components removed Housing property disposals

Social Housing Shared Properties ownership £’000 £’000 34,523 24 3,937 0 (2,408) (3) (191) (1)

At 31 December 2012

35,861

20

GROUP & ASSOCIATION Properties in Other the course of Properties construction Total £’000 £’000 £’000 521 0 35,068 0 0 3,937 0 0 (2,411) 0 0 (192) 521

0

36,402

14 Units in management

Available for social housing rent Supported housing Scheme managers Extra care Shared ownership Sub total social housing units Intermediate rented Market rented Equity stake Managed for another HA Properties managed for private owners Sub total non social housing units Total units owned and managed

GROUP & ASSOCIATION Closing Opening units at units at New Mortgage Rescue Sales Transfers 31/12/12 01/01/12 Build 8,095 26 6 (40) 4 8,091 86 3 1 90 25 (2) 23 59 (1) 58 24 (1) 1 24 8,289 29 6 (41) 3 8,286 6 17 23 6 6 39 2 (1) (2) 38 12 12 1,194 (1) 1,193 1,257 9,546

17 46

2 (1) 8 (42)

(3) 0

1,272 9,558

Within social housing available to rent 72 units were vacant as at 31 December 2012 (31 December 2011: 81 units).

15 Fixed asset investments

15(a) Equity loans

Annual Report 2012

Page 37 of 47

Notes to the financial statements (continued) for the year ended 31 December

GROUP & ASSOCIATION 2012 2011 £’000 £’000 430 548 145 0 3,372 0 0 (118) 3,947 430

At 1 January Additions Reclassification from social housing Disposals At 31 December

15(b) Grants GROUP & ASSOCIATION 2012 2011 £’000 £’000 352 470 141 0 3,136 0 0 (118) 3,629 352

At 1 January Additions Reclassification from social housing Disposals At 31 December

16

Other tangible fixed assets GROUP Motor Office Site vehicles equipment equipment £’000 £’000 £‘000

Freehold office property £’000

Total £’000

Cost At 1 January 2012 Additions Disposals

11 0 0

2,350 362 (7)

4,804 168 (43)

1,751 75 0

8,916 605 (50)

At 31 December 2012

11

2,705

4,929

1,826

9,471

Depreciation At 1 January 2012 Charge for year Eliminated on disposals

11 0 0

1,731 241 (7)

2,335 346 (36)

584 33 0

4,661 620 (43)

At 31 December 2012

11

1,965

2,645

617

5,238

At 31 December 2012

0

740

2,284

1,209

4,233

At 1 January 2012

0

619

2,469

1,167

4,255

Net book value

16

Other tangible fixed assets (continued)

Annual Report 2012

Page 38 of 47

Notes to the financial statements (continued) for the year ended 31 December

Motor Office Site vehicles equipment equipment £’000 £’000 £‘000

ASSOCIATION Freehold office property Total £’000 £’000

Cost At 1 January 2012 Additions Disposals

11 0 0

2,297 354 (7)

4,785 168 (43)

1,751 75 0

8,844 597 (50)

At 31 December 2012

11

2,644

4,910

1,826

9,391

Depreciation At 1 January 2012 Charge for year Eliminated on disposals

11 0 0

1,717 227 (7)

2,329 340 (36)

584 33 0

4,641 600 (43)

At 31 December 2012

11

1,937

2,633

617

5,198

At 31 December 2012

0

707

2,277

1,209

4,193

At 1 January 2012

0

580

2,456

1,167

4,203

Net book value

17

Debtors

Amounts falling due within one year Rental and service charge debtors Bad debt provision for rental and service charges Capital debtors Inter‐group balances Loans to employees Other debtors and prepayments

GROUP 2012 2011 £’000 £’000

ASSOCIATION 2012 2011 £’000 £’000

1,852 (960) 1,475 0 4 931 3,302

1,852 (960) 1,475 434 4 902 3,707

1,913 (940) 3,164 0 4 1,002 5,143

18

Creditors: amounts falling due within one year Annual Report 2012

Page 39 of 47

1,913 (940) 3,164 215 4 997 5,353

Notes to the financial statements (continued) for the year ended 31 December

2012 £’000 2,105 (23) 791 0 265 387 605 0 5,987 10,117

Housing loans Capitalised loan fees Rents and service income received in advance Grants received and receivable in advance Taxation and social security Sinking fund deferred income Accrued interest Intergroup balance Accruals and other deferred income

GROUP 2011 £’000 2,648 (12) 757 5,028 231 300 276 0 6,963 16,191

ASSOCIATION 2012 2011 £’000 £’000 2,105 2,648 (23) (12) 791 757 0 5,028 234 229 387 300 605 276 175 191 5,786 6,822 10,060 16,239

19 Creditors: amounts falling due after more than one year 2012 £’000 123 102,609 205 (559) 102,378

Recycled Capital Grant Fund Housing loans Accrued mortgage interest Capitalised Loan fees

GROUP 2011 £’000 1 90,638 0 (274) 90,365

ASSOCIATION 2012 2011 £’000 £’000 123 1 102,609 90,638 205 0 (559) (274) 102,378 90,365

Housing loans are secured by specific charges on the Association's housing properties. Rates of interest during the year ranged from 0.7% up to 15.9%. The weighted average rate of interest for 2012 was 4.67% (2011: 4.95%). As at 31 December 2012, 66% of loans were at fixed rates and 34% were at variable rates.

The loans are repayable as follows:

Due within: One year or less Between one and two years Between two and five years In five years or more

2012 £’000

GROUP 2011 £’000

2,105 2,120 7,409 93,080 104,714

2,648 2,719 8,928 78,991 93,286

2,105 2,120 7,409 93,080 104,714

2,648 2,719 8,928 78,991 93,286

36,500

16,500

36,500

16,500

56,580 93,080

62,491 78,991

56,580 93,080

62,491 78,991

Repayable otherwise than by instalments in more than five years Repayable by instalments wholly or partly in more than five years In five years or more

ASSOCIATION 2012 2011 £’000 £’000

19 Creditors: amounts falling due after more than one year (continued)

Annual Report 2012

Page 40 of 47

Notes to the financial statements (continued) for the year ended 31 December

The movement on the Recycled Capital Grant Fund was as shown below:

GROUP 2012 2011 £’000 £’000 At 1 January 2012 1 1 Utilised during the year (1) 0 Additions during the year (123) 0 At 31 December 2012 (123) 1

ASSOCIATION 2012 2011 £’000 £’000 1 1 (1) 0 (123) 0 (123) 1

20 Provisions for liabilities and charges

Contractual obligations include potential liabilities in respect of dilapidations, an onerous lease and deferred taxation. Insurance provisions relate to excess levels on known insurable claims yet to be settled.

GROUP Contractual Deferred Other Total obligations Insurance taxation £’000 £’000 £’000 £‘000 £’000 At 1 January 2012 50 58 4 12 124 Utilised during the year 0 0 0 (6) (6) Released during the year 0 0 0 0 0 Additions during the year 22 32 1 0 55 At 31 December 2012 72 90 5 6 173 ASSOCIATION Contractual obligations £’000 50 0 0 22 72

At 1 January 2012 Utilised during the year Released during the year Additions during the year At 31 December 2012

Insurance £’000 58 0 0 32 90

Deferred taxation £’000 0 0 0 0 0

Other £‘000 12 (6) 0 0 6

21 Called‐up share capital

Total £’000 120 (6) 0 54 168

GROUP & ASSOCIATION 2012 2011 £ £ Allotted, issued and fully paid At 1 January Issued during the year Shares cancelled during the year At 31 December

83 6 (8) 81

88 5 (10) 83

Shareholders have no entitlement to dividends or return of monies in respect of shares surrendered or a share in the assets in the event of the Association being wound up. No shareholder may hold

Annual Report 2012

Page 41 of 47

Notes to the financial statements (continued) for the year ended 31 December

more than one share and each share shall carry only one vote.

22

Reserves

GROUP

At 1 January 2012 Surplus for the year Transfer from major repairs designated reserve Balance at 31 December 2012

At 1 January 2012 Surplus for the year Transfer from major repairs designated reserve Balance at 31 December 2012

Special reserve £'000 131 0 0

Major repairs designated reserve £'000 9,880 0 (2,500)

Revenue reserve £'000 18,279 6,492 2,500

131

7,380

27,271

Special reserve £'000 131 0 0 131

ASSOCIATION Major repairs designated Revenue reserve reserve £'000 £'000 9,880 18,250 0 6,551 (2,500) 2,500 7,380 27,301

The Special reserve was established following the transfer of engagements of Corlan Housing Association, Corlan Co‐op Housing Association and Western Permanent, representing goodwill and capital.

23 Reconciliation of surplus before taxation to net cash inflow from operating activities

Annual Report 2012

Page 42 of 47

Notes to the financial statements (continued) for the year ended 31 December

Surplus for the year before taxation Interest payable Interest receivable Depreciation Surplus on sale of fixed assets Exceptional item Movement in working capital Net cash inflow from operating activities

24

2012

GROUP 2011

£’000 6,493 4,545 (79) 4,557 (1,282) 708 (1,309) 13,633

£’000 7,940 4,590 (8) 4,268 (2,091) 0 (664) 14,035

ASSOCIATION 2012 2011 £’000 6,551 4,545 (85) 4,537 (1,282) 708 (1,603) 13,371

£’000 7,907 4,590 (14) 4,248 (2,091) 0 (624) 14,016

Reconciliation of net cashflow to movement in net debt

2012 £’000 6,205 (11,428) (5,223) 0 (88,970) (94,193)

Increase in cash in year (Increase) in debt Net cash outflow before financing Accrued interest added to principal Net debt at 1 January Net debt at 31 December

25

GROUP 2011 £’000 2,500 (3,534) (1,034) (526) (87,410) (88,970)

ASSOCIATION 2012 2011 £’000 £’000 5,906 2,560 (11,428) (3,534) (5,522) (974) 0 (526) (89,113) (87,613) (94,635) (89,113)

Analysis of net debt

Cash at bank and in hand Loans

At 1 January 2012 £’000 4,316 (93,286) (88,970)

25

GROUP Accrued interest Cash flow At 31 added to during the December principal year 2012 £’000 £’000 £’000 0 6,205 10,521 0 (11,428) (104,714) 0 (5,223) (94,193)

Analysis of net debt (continued)

Annual Report 2012

Page 43 of 47

Notes to the financial statements (continued) for the year ended 31 December

ASSOCIATION

Cash at bank and in hand Loans

26

At 1 January 2012 £’000 4,173 (93,286) (89,113)

Accrued interest Cash flow At 31 added to during the December principal year 2012 £’000 £’000 £’000 0 5,906 10,079 0 (11,428) (104,714) 0 (5,522) (94,635)

Capital commitments GROUP & ASSOCIATION 2012 2011 £’000 £’000

Capital expenditure that has been contracted for but has not been provided for in the financial statements Capital expenditure that has been authorised by the Board but has not yet been contracted for

20,322

9,378

9,695

1,545

At 31 December 2012 the Association intended to fund this expenditure from social housing grants, loan drawdown from loan facilities already in place and new bank facilities.

27

Operating leases

At 31 December the Group had annual commitments under operating leases as follows:

GROUP & ASSOCIATION 2012 2011 Land and Office Motor Land and Office Motor buildings equipment vehicles buildings equipment vehicles £’000 £’000 £’000 £’000 £’000 £’000 Leases expiring: Within one year 6 1 0 0 6 3 Between two and five years 65 8 23 68 10 10 71 9 23 68 16 13

28

Pension schemes

The Group makes pension contributions on behalf of its employees to defined benefit and money purchase schemes.

Two defined benefit structures are made available through the Social Housing Pension Scheme (SHPS). The Scheme is funded and is contracted out of the state scheme. SHPS is a multi‐employer defined benefit arrangement. Employer participation is subject to adherence with the employer responsibilities and obligations as set out in the “SHPS House Policies and Rules Employer Guide”.

One of the structures is based on final salary with a 1/60th accrual rate, and the other, which has

28

Pension schemes (continued) Annual Report 2012

Page 44 of 47

Notes to the financial statements (continued) for the year ended 31 December

been open to new members since 1 April 2011, is based on career average revalued earnings (CARE) with a 1/60th accrual rate. The final salary scheme was closed to new members on 31 March 2011.

The Trustee commissions an actuarial valuation of the Scheme every 3 years. The main purpose of the valuation is to establish the financial position of the Scheme in order to determine the level of future contributions required, in respect of each benefit structure, so that the Scheme can meet its pension obligations as they fall due. The split of the total contribution rate between member and employer is set at individual employer level.

The actuarial valuation assesses whether the Scheme’s assets at the valuation date are likely to be sufficient to pay the pension benefits accrued by members as at the valuation date. Asset values are calculated by reference to market levels. Accrued pension benefits are valued by discounting expected future benefit payments using a discount rate calculated by reference to the expected future investment returns.

During the accounting period the Association paid contributions at the rate of 7.2% in respect of the CARE structure and 8.6% in respect of the final salary structure. Member contributions were 7.7% in respect of the CARE structure and 9.2% of the final salary structure. In addition the Association made an annual contribution towards the past service deficit of £0.41m to March 2012 and £0.43m from April 2012. As at the balance sheet date there were 186 active members (2011: 189) of the Scheme employed by the Association. The annual pensionable payroll in respect of these members was £4,819,457 (2011: £5,172,198). The Association continues to offer membership of the Scheme to its employees.

It is not possible in the normal course of events to identify on a reasonable and consistent basis the share of underlying assets and liabilities belonging to individual participating employers. The SHPS Scheme is a multi‐employer scheme, where the assets are co‐mingled for investment purposes, and benefits are paid out of total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS17 represents the employer contribution payable.

The last formal valuation of the Scheme was performed as at 30 September 2011 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme’s assets at the valuation date was £2,062 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £1,035 million, equivalent to a past service funding level of 69.7%. The financial assumptions underlying the valuation as at 30 September 2011 were as follows:

Valuation Discount Rates:

Pre‐Retirement

Non Pensioner Post Retirement Pensioner Post Retirement Pensionable Earnings Growth Price Inflation

% p.a.

7.0% 4.2% 4.2% 2.5% per annum for three years, then 4.4% 2.9%

Pension Increases:

Pre 88 GMP Post 88 GMP Excess Over GMP

0.0% 2.0% 2.4%

Annual Report 2012

Page 45 of 47

Notes to the financial statements (continued) for the year ended 31 December

28

Pension schemes (continued)

Expenses for death‐in‐service insurance, administration and Pension Protection Fund (PPF) levy are included in the contribution rate.

Following consideration of the results of the actuarial valuation, the deficit contribution has increased from 1st April 2013 to £0.66m per annum and will increase by an average of 4.2% per annum until 2020, when they are expected to be £0.88m per annum. Contributions in 2021 are expected to be £0.54m per annum and will increase by 3.9% per annum in both 2022 and 2023.

Contributions in 2024 are expected to be £0.29m and will increase by 3% per annum in both 2025 and 2026, when contributions are scheduled to end.

The Association also participates in the Cardiff and Vale of Glamorgan Local Government Pension Scheme, a defined benefit structure. For funding purposes, the Association’s costs are pooled within a sub‐section of small participating bodies of that scheme. Its contributions to the scheme include contributions in respect of just one active employee member as well as deficit contributions relating to past employees of that sub‐section. It is not possible to identify the share of underlying assets and liabilities belonging to individual participating employers. Accordingly, due to the nature of the plan, the accounting charge for the period under FRS17 represents the employer contribution payable. The Association’s employer contribution rate was 27.0% from 1 April 2009 to 31 March 2010, 29.4% from 1 April 2010 to 31 March 2011 and fell to 22.7% from 1 April 2011. In addition, from April 2011, the Association made a monthly contribution towards the past service deficit of £6,325 to March 2012 and £6,625 from April 2012.

The total pension cost of the Association for the defined benefit schemes was £961,251 (2011: £911,287).

The Group also contributed to money purchase schemes. Contributions in the year totalled £8,103 (2011: £5,596).

29

Subsidiary Undertakings

The Association has three subsidiary undertakings, Cambria Maintenance Services Ltd (Registration No. 7389484), Enfys Developments Ltd (Registration No. 8292315) and Castell Homes Ltd (Registration No. 8292028), in which it owns 100% of the issued share capital. Both Enfys Developments Ltd and Castell Homes Ltd were dormant at the year end.

During the year the total Cambria turnover of £3,472,000 (2011: £2,762,000) was billed to the parent company in respect of reactive and planned maintenance services. At the year end £175,000 (2011: £191,000) was outstanding. The Association made a loan of £100,000 to provide working capital. This was outstanding at the year end together with £334,000 in respect of gift aid.

Annual Report 2012

Page 46 of 47

Notes to the financial statements (continued) for the year ended 31 December

30

Related party transactions

The following members of the Board were also residents of the Association during the year:

Mr D Davies Mr J Rides Mr J Williams Mr B Jarvis Mr R Cornish

Elected 26 April 2007 Resigned 26 April 2012 Elected 30 April 2009 Elected 29 April 2010 Elected 26 April 2012

The above Members were on standard Association resident agreement terms and they were forbidden from using their position on the Board to their personal advantage.

Two Members also held positions on the Board of Slocombe Cottages for the Aged and Infirm, which is a registered charity and a Registered Social Landlord. The Association provided management services for which it charged £5,762 (2011: £5,428).

During the year there was one Board member on each of the Boards of the three Care and Repair agencies which have received donations from the Association after their demerger from the Association. The donations made during 2012 were as follows:

Agency

Donation

Member

£2,581 £3,578 £4,041

Mr D Davies Mr J Williams Mr I Gittens

Merthyr Care and Repair Agency Flintshire Care and Repair Agency Bridgend Care and Repair Agency

31

Legislative provisions

The Association is incorporated under the Industrial and Provident Societies Act 1965. The Association adopted charitable rules with effect from 20 January 2005.

Annual Report 2012

Page 47 of 47

Cardiff OfďŹ ce (registered) 3 Alexandra Gate Unit Pengam Green Tremorfa Cardiff CF24 2UD Fax: 02920 415380

Flint OfďŹ ce 2 Acorn Business Park Aber Road Flint Flintshire CH6 5YN Fax: 01352 736340

Tel: 0800 052 2526 Minicom: 0800 052 5205 Email: contactus@wwha.co.uk Website: www.wwha.co.uk @wwha If you would like this document in Braille, large print, Welsh or another language or format, or if you would like the services of an interpreter, please contact us.

Wales & West Housing Association is registered as a charitable association under the Industrial and Provident Societies Act 1965 No. 21114R