1. Barrhead Housing Association Ltd
An Overview of the Financial Statements For the Year Ended 31 March 2017

2. Change in Format of Statements
Second Year of changed presentation after adopting FRS 102(Financial Reporting Standard)
Main statements have been renamed –
Old Income & Expenditure Account now called ‘Statement of Comprehensive Income’
Old Balance sheet now called ‘Statement of Financial Position’

3. A Reminder of the Main Changes
Greater reported income due to the treatment of grants as income over the life of the associated asset – new income for ‘amortised’ grants
Greater Operating Costs as housing depreciation is calculated on the gross cost of housing assets (ie previously calculated on cost after deducting the HAG received) – greater depreciation
Includes either income or cost for any changes to the value of the pension deficit creditor

4. Statement of Comprehensive Income For the Year Ended 31 March 2017
2016
£’ 000
Turnover
5,030.6
4,808.2
Less Operating costs
-3,334.8
Operating Surplus
1,588.1
1,473.3
Gain/(Loss) on Disposal of property, plant and equipment
-11.4
6.9
Interest Receivable
27.8
26.9
Interest Paid and Finance Costs
-433.1
-470.5
Pension Re-measurement
510.9
4.2
Surplus for Year
1682.3
1,040.9

5. Turnover
Overall increase on previous year of £222.4k, broken down as follows:
£144k increase on net Rental Income and service charges from inflationary rental increase and the increase in the number of properties.
£85.5k increase in revenue grants received/ amortised
£7.2k decrease on income from Other Activities.

6. Operating Costs
An increase in operating costs from previous year of £107.7k
£88.7k of this is from ‘Letting Activities’ cost.
£66.7k of this is due to higher depreciation.
The £22k balance on this increase is mostly from greater overhead costs which were offset by lower planned and cyclical maintenance costs and bad debts.
£19k of the increased operating costs was from ‘Other Activities’ which includes wider role activities and staff time working towards future developments .

7. Bank Interest Received Loan Interest and Finance Costs Paid
Interest Received increased very slightly - £900.
Interest rates received were very low (and even lower since year end).
Loan interest paid reduced by £36.6k from last year. This was due to a loan moving from a fixed rate basis to libor.

8. Pension Re- Measurement
Large income of £510.9k shown on the Statement of Comprehensive Income (SoCI).
When financial statements were restated for year to due to FRS102 we had to bring in a large pension deficit liability of £1129.6k. This was the shortfall on our pension contributions based on the actuarial valuation of the scheme.
The subsequent September 2015 triennial valuation by the pension provider, TPT revalued the assets and liabilities of the overall scheme reducing the deficit from £304m to £198m.
Consequently BHA’s deficit, taking into account this revised valuation and our continued payments has reduced our pension creditor to £484.5k.
The reduction of creditor means a credit to the SoCI. (No cash income, just an accounting adjustment!)

9. What does the Surplus Mean?
The Accounts show a surplus of £1682.3k but what does this not explain?
Due to the nature of Accounting for Housing Associations where the majority of income is spent on Improving or Purchasing Properties and Repaying Loan Capital many of the costs are not deducted in the SOCI to determine the surplus.
The cash flow in and out of the Association also has to be considered to get a full understanding of what the Rental Income is used for.

10. Cash Flow 2017 £’000 Surplus per SOCI 1,682.3
Adjustments For Non Cash Items:
Add back Depreciation
1420.3
Less income from amortising grant income
-862.8
Less Increase in Debtors
-323.9
Add Increase in Creditors
147.3
Less Pension deficit movement less payments made
-600.8
Adjustments For Investing and finance Activities:
Net book value of fixed assets disposed of
12.4
Cash received for fixed assets disposed of
-1.0
Net Interest
405.3
Cash Into the Association From Operating Activities
1879.2

11. Cash Flow 2016 £’000 NET CASH GENERATED FROM OPERATING ACTIVITIES
1879.2
New Build (Final Costs Rankin Crt/future schemes)
Property Purchases
Components - Boilers, kitchens, bathrooms, windows
Medical adaptations
-20.0
-634.4
-381.6
-36.0
Capital Grants received
361.9
Office Equipment & IT
Proceeds from Sale of fixed Assets
-10.0
1.0
Loan Interest and Capital paid less interest received
-952.3
NET CASH INTO THE ASSOCIATION
207.8

12. CASH POSITION YEAR END 2017 2016 £’000 CASH AT BEGINNING OF YEAR
2711.1
CASH INFLOW IN YEAR
207.8
CASH AT END OF YEAR
2918.9

13. Statement of Financial Position At Year End 2017 2016
£’000
Tangible Fixed Assets
47,479.0
47,829.9
Current assets - debtors
560.6
236.7
Current assets - cash
2,918.9
2,711.1
3,479.4
2947.8
Current liabilities - Creditors due within one year
-1,607.7
Net Current Assets
1709.2
1,340.1
Total assets less Current Liabilities
49,169.9
Creditors due after one year
-40,424.7
-42,088.7
Total Net Assets
8763.5
7,081.2

14. Capital Reserves
2017
2016
£’000
Share Capital -
Income & Expenditure Reserve
8,757.0
7,074.4
Restricted Funds
6.8
25.7
8,763.5
7,081.2

15. Statement of Financial Position
Tangible Fixed Assets less depreciation has decreased by £350.9k despite tangible fixed asset additions of £1, due to the large depreciation charge of £1,420.3k.
Net Asset Value increased by £1,682.3k to £8,756.7.
Cash Position increased by £207.8k.

16. Debtors Total balance of £560.6k, increased from £236.7k.
This includes £251.3k due from the Scottish Government for the 9 ROTS properties purchased in March.
Includes Net rent arrears (gross arrears less the bad debt provision). Balance of £21.9k, down from £37.0k.
Other Debtors are mainly for prepaid expenses, amounts due from the subsidiary, term deposits interest due and cash due from Allpay.

17. Creditors due within 1 year
Amount Payable of £1,709.2k, up from £1,607.7k.
£578.9 of this being loan capital repayments
£112.6k of this being for rental income received in advance
Pension Deficit payable in year to March 18 of £95.3k
Majority of Balance is payable to suppliers for work done or services received. (The kitchen replacement programme ran up until the end of March resulting in large amounts payable after the year end).

18. Current Ratio
The Ratio of Current Assets (Debtors and cash) to Current Liabilities (Creditors) shows how well we can meet our liabilities that are due within one year from cash in bank and cash due at the year end
The ratio at 2.0 indicates that we have no problems meeting our short term liabilities.

19. Creditors due After one Year
Unlike previous years when this only related to loans it now also includes the:
Deferred Grants - Balance of Housing Association Capital Grants less amortisation - £29,320k*
Pension deficit - £389.1k**
Loans - £10,715.6k
* Grants are written off (amortised)each year over the life of the asset for which the grant was received.
** Pension deficit payment repayment profile has been changed to reflect a final payment in February 2022 from September

20. Bank Covenants
There are certain financial covenants (criteria) that our results must attain to satisfy the conditions set out in our loan agreements. These are in relation to:
Interest Cover, ie measures the ability to pay the loan interest from the operating surplus (after certain adjustments eg Depreciation add back, amortisation deduction).
To be >= 110% - Actual 301%
Gearing, ie the Level of Debt less cash as a proportion of Net worth (HAG and Reserves)
To be <= 50% - Actual 31%
We very comfortability meet the covenant requirements.

21. Performance Summary
Continued to make a healthy surplus required for continued investment
Continued to invest in the stock through our Planned Maintenance programme
Continued to add to our stock numbers with the acquisition of 9 Rent Off The Shelf properties and 2 Mortgage to Rent Properties supported by Scottish Government grants.
Continued to look for cost savings and Value for money.
Focus on cost control with continual monitoring of our budget projections compared with actual spend.