Delivering our vision
Annual Report and Group Financial Statements 2020-21
**Who we are**
Southern Housing Group is a not-for-profit housing association. We are a business with social objectives, which means we invest every penny we make and more in providing good quality homes and services.
**The consolidated financial statements of:** Southern Housing Group Limited Southern Home Ownership Limited Southern Space Limited Southern Development Services Limited Spruce Homes Limited Southern Housing Construction Limited Rosemary Simmons Memorial Housing Association Limited The Fellowship Houses Trust Hewitt Homes
**Cover and page 10 image: Palliser Road, West Kensington, London**
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01 04
Overview Financial statements
A year in review 03 Independent auditors’ report 92
The Group at a glance 04 Consolidated and Association
Where we operate 06 Statements of Comprehensive Income 98
Board KPIs 2020-21 08 Consolidated and Association
Statements of Financial Position 99
Responding to change 10
Consolidated and Association
Statements of Changes in Reserves 100
Consolidated Statement of Cash Flows 101
Notes to the financial statements 102
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## 02 **Strategic review**
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Strategic review
Chair and CEO’s statement 22
05
Our external environment 24
Our business 26 Other information
Corporate plan 2020-23 28
Principal advisors, Secretary and registered office 136
Financial review 52
Value for money 57
Risk management 62
Going concern statement 66
Viability statement 67
03
Governance report
Chair’s introduction 70
Governance report 71
Our Board 76
Operating structure 2020-21 80
Remuneration and Nominations Committee report 82
Audit and Risk Committee report 85
Statement of the Board’s responsibilities 88
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Annual Report and Group Financial Statements 2020-21 **01**
**Overview** A year in review **03** The Group at a glance **04** Where we operate **06** Board KPIs 2020-21 **08** Responding to change **10**
**02 Southern Housing Group**
## **A year in review**
## **Alan Townshend** Group Chief Executive
Welcome to our Annual Report and Group Financial Statements 2020-21.
“ We’re immensely proud of what we achieved in such a time. We prioritised keeping residents safe, completing 100% of gas boiler services, and maintaining emergency repairs with only a small reduction in the percentage that were completed in 24 hours.”
Looking back on 2020-21, it has been a year in which there has been so much hardship as well as so much hope.
We would like to thank residents, colleagues, contractors and staff in the NHS and our local authority partners for everything that they have done to manage the impact of the pandemic in what has been a life-changing year for many.
We would also like to thank our residents and colleagues for their patience and tenacity during a year when we all had to make significant adjustments to the way we live, work and support each other.
We’re immensely proud of what we achieved in such a time. We prioritised keeping residents safe, completing 100% of gas boiler services, and maintaining emergency repairs with only a small reduction in the percentage that were completed in 24 hours.
We kept all emergency and health and safety services running, and our cleaning and gardening teams ensured that schemes were regularly cleaned so that residents could enjoy outdoor spaces.
By summer 2020, we were able to remobilise services like lettings and start getting properties to those that needed them again, ending the year with an average time to re-let empty homes of 29 days.
As we publish this annual review, there is cause for some optimism nationally, and as an organisation we can reflect on an impressive response to the pandemic. We contacted more than 2,700 vulnerable residents and kept every critical health and safety and emergency repair service going throughout. We have also been humbled by the pandemic, and continue to learn lessons as we adapt, for the long term, to supporting residents and operating in an environment that can change so rapidly.
Indeed, adapting to digital and remote working this year has brought both challenges and benefits.
One of the areas in which it has made a positive difference is enabling our residents’ scrutiny and involvement forums and groups to continue to meet, feedback to us and scrutinise the services that we provide. This has further underpinned the commitment we have made to ensuring that we listen to residents, act on what they tell us, and put things right when they go wrong.
Another area where we’ve seen change is the reduction in the use of offices and the number of miles our colleagues and contractors have covered on the road this year. This made a real difference to the carbon emitted from our operations.
We will be taking the learning from our experiences this year to help shape our pathway to net zero carbon and embed sustainability in our long-term strategy.
**Alan Townshend** Group Chief Executive
Annual Report and Group Financial Statements 2020-21 **03**
## **The Group at a glance**
Our social purpose is to provide high-quality homes, services and care for those in housing need, and to make our customers’ and their communities’ lives better. Our vision for the future is clear – we want to be a trusted, caring landlord that listens to residents and builds high-quality homes in places people are proud to live.
Initially set up as a charitable trust to provide housing in London in 1901, the Group now owns and manages over 30,000 homes in London and the South East for around 77,000 residents and customers. We offer a range of housing products for rent and sale, and provide care and support and community investment services. We invest every penny we make and more into good quality homes and services.
## **Non-Financial**
**88%** repairs satisfaction
**£5.3m** income generated for the benefit of residents
**Top 100** Best Companies
**£131m**
invested in developing, maintaining and improving new and existing homes
**4,389** people benefitted from Group grants
**Read more about our strategic progress:** – Corporate Plan 2020-23 on pages 28-51.
**04 Southern Housing Group**
## **Financial**
Over
**30,000** homes
**2,617** new households created 2020-21
**77,000** residents across London and the South East
**1,042** colleagues working in a diverse range of roles
**£1.5m** invested in communities 2020-21
Turnover
**£212m** (2020: £236m) Operating surplus
**£61m** (2020: £62m)
Gearing
**41%**
(2020: 40%) Operating margin
**28.8%**
(2020: 26.3%)
Net assets
**£711m**
(2020: £634m) Credit rating **A3 Moody’s**
(2020: A3)
Regulatory rating
**G2, V2** (2020: G2, V2)
**Read more:** – Financial review on pages 52-61.
Annual Report and Group Financial Statements 2020-21 **05**
## **Where we operate**
## Homes we own or manage by local authority.
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53
4
82
13
79
38
86
83 61
58 16
69
74
9
88 63
70 25 49
7
34 87
64
30 60 65
72 75 73
52
15
22 80
18 20
24 3
68 51 27
17 39
54 81
36
57 62
28 47
2
89 [1] 11
35
42 23
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## **Local authorities**
01. Adur – West Sussex
02. Arun – West Sussex
03. Ashford – Kent
04. Aylesbury Vale – Bucks
05. Barking and Dagenham – Greater London
06. Barnet – Greater London
07. Basingstoke and Deane – Hamps
08. Bexley – Greater London
09. Bracknell Forest – Berks
10. Brent – Greater London 11. Brighton & Hove – East Sussex 12. Bromley – Greater London 13. Broxbourne – Herts 14. Camden – Greater London 15. Canterbury – Kent
16. Castle Point – Essex
17. Chichester – West Sussex 18. Crawley – West Sussex 19. Croydon – Greater London 20. Dover – Kent 21. Ealing – Greater London
22. East Hampshire – Hamps
23. Eastbourne – East Sussex
24. Eastleigh – Hampshire
25. Elmbridge – Surrey
26. Enfield – Greater London 27. Folkestone and Hythe – Kent
28. Gosport – Hamps
29. Greenwich – Greater London 30. Guildford – Surrey
31. Hackney – Greater London 32. Haringey – Greater London 33. Harrow – Greater London 34. Hart – Hamps 35. Hastings – East Sussex 36. Havant – Hamps 37. Havering – Greater London 38. Hertsmere – Herts
39. Horsham – West Sussex
40. Hounslow – Greater London 41. Hammersmith & Fulham – Greater London 42. Isle of Wight – IoW
43. Islington – Greater London 44. Kensington & Chelsea – Greater London 45. Kingston upon Thames – Greater London
**06 Southern Housing Group**
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Stock size
1-249
250-499
500-999
1000+ Greater London
26
6
33
32 77
59
37
10
14 43 31
5
55
21 85 76
41
44
40 69 29
46 8
78
48
50
45
12
19
71
46. Lambeth – Greater London 61. Rochford – Essex 76. Tower Hamlets – Greater London
47. Lewes – East Sussex 62. Rother – East Sussex 77. Waltham Forest – Greater London
48. Lewisham – Greater London 63. Runnymede – Surrey 78. Wandsworth – Greater London
49. Medway – Kent 64. Rushmoor – Hamps 79. Watford – Herts
50. Merton – Greater London 65. Sevenoaks – Kent 80. Waverley – Surrey
51. Mid Sussex – West Sussex 66. Sheffield – South Yorkshire* 81. Wealden – East Sussex
52. Mole Valley – Surrey 67. Southampton – Hamps 82. Welwyn Hatfield – Herts
53. N Hertfordshire – Herts 68. Southend-on-Sea – Essex 83. West Berkshire – Berks
54. New Forest – Hamps 69. Southwark – Greater London 84. West Suffolk – Suffolk*
55. Newham – Greater London 70. Surrey Heath – Surrey 85. Westminster – Greater London
56. Norwich – Norfolk* 71. Sutton – Greater London 86. Windsor Maidenhead – Berks
57. Portsmouth – Hamps 72. Tandridge – Surrey 87. Woking – Surrey
58. Reading – Berks 73. Thanet – Kent 88. Wokingham – Berks
59. Redbridge – Greater London 74. Thurrock – Essex 89. Worthing – West Sussex
60. Reigate and Banstead – Surrey 75. Tonbridge and Malling – Kent * Not shown on map.
OVERVIEW
STRATEGIC REVIEW
GOVERNANCE REPORT
FINANCIAL STATEMENTS
OTHER INFORMATION
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Annual Report and Group Financial Statements 2020-21 **07**
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Board KPIs
2020-21
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2. Void turnaround time
Days
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3. Emergency repairs completed
in 24 hours
%
93
Target 2020-21: 85%
Performance 2019-20: 93%
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**1. Rent arrears** %
**4.65 29** Target 2020-21: 4.00% Target 2020-21: Performance 2019-20: 3.97% Performance 2019-20: **4. Gas servicing** % **with service** % **100 74** Target 2020-21: 100% Target 2020-21: Performance 2019-20: 100% Performance 2019-20: **7. Overdue FRA Inspections 1 0** Target 2020-21: 0 Target 2020-21: Performance 2019-20: 1 Performance 2019-20:
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29 93
Target 2020-21: 17 Target 2020-21:
Performance 2019-20: 16 Performance 2019-20:
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5. Overall customer satisfaction 6. Communal electrical safety
with service %
%
74 100
Target 2020-21: 85% Target 2020-21: 100%
Performance 2019-20: 83% Performance 2019-20: 99%
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**6. Communal electrical safety** %
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Target 2020-21: 100%
Performance 2019-20: 99%
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**8. Overdue FRA P0 Actions**
**9. Overdue FRA P1 actions**
**175**
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Target 2020-21: 100
Performance 2019-20: n/a
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Target 2020-21: 0 Performance 2019-20: 0
**10. Overdue NOD Actions**
**11. Staff participating in survey** %
**12. Cases where Ombudsman found maladministration**
**3** Target 2020-21: 0 Performance 2019-20: 3
**75 6** Target 2020-21: 72% Performance 2019-20: n/a
**75**
Target 2020-21: 0 Performance 2019-20: n/a
**08 Southern Housing Group**
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13. Reinvestment 14. New supply (Social) 15. New supply (Non-Social)
% % %
5.8 1.4 0.0
Target 2020-21: 9.5% Target 2020-21: 0.3% Target 2020-21: 0.0%
Performance 2019-20: 12.9% Performance 2019-20: 1.2% Performance 2019-20: 1.0%
16. Gearing 17. EBITDA MRI 18. Social Housing Cost per unit
% % £
40.7 38.7 5,759
Target 2020-21: 42.7% Target 2020-21: 25.5% Target 2020-21: 6,130
Performance 2019-20: 40.4% Performance 2019-20: 61.2% Performance 2019-20: 5,620
19. Operating margin (social housing) 20. Operating margin (overall) 21. Return on capital employed
% % %
18.0 28.8 2.5
Target 2020-21: 11.0% Target 2020-21: 24.5% Target 2020-21: 2.1%
Performance 2019-20: 16.2% Performance 2019-20: 26.3% Performance 2019-20: 2.6%
22. Social Housing Lettings Definitions for the above metrics can be
interest cover found in the Value for Money statement
% starting on page 57.
65.1
Target 2020-21: 46.2%
Performance 2019-20: 57.9%
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**Read more about our strategic progress:** – Corporate Plan 2020-23 on pages 28-51.
Annual Report and Group Financial Statements 2020-21 **09**
## **Responding to change**
In a year dominated by the global response to the coronavirus pandemic, we are proud of the way we have lived our values and made progress towards our aims for better building safety, and stronger resident involvement and scrutiny.
This annual review considers the progress we have made towards our vision of being a trusted, caring landlord that listens to residents and builds high-quality homes in places people are proud to live. We believe we have made significant strides towards this in spite, or perhaps, in some ways, accelerated by, the way we have worked together during the pandemic.
**10 Southern Housing Group**
## **Building safety**
**£14.5m** invested in building safety in 2020-21
**Putting building and fire safety first** Building and fire safety is a clear area of focus for us. This year, we achieved high health and safety standards and established a new Building Safety Team to take this work forwards. At the same time, we continued to perform strongly against our key health and safety performance targets, such as gas servicing and fire risk assessment inspections – both of which were 100% compliant at year-end.
Annual Report and Group Financial Statements 2020-21 **11**
**Responding to change** (continued)
## **The Group’s Building Safety Programme**
As a responsible landlord, we have an ongoing programme in place to check our buildings and carry out any work required to ensure that they comply with the government’s guidance.
**How we planned our Building Safety Programme in 2020-21**
## **Phase 1**
**Prioritising our tall buildings over 18 metres**
We surveyed all our buildings over 18 metres and we have an EWS1 form in place for each building where possible. Where remedial work has been identified we are moving ahead with this in a planned programme. The surveys of all our tall buildings are complete.
## **Phase 2**
**Prioritising buildings under 18 metres using a risk based analysis** Our risk assessment has highlighted nearly 230 buildings that we need to prioritise in this next phase of work.
## **How have we chosen these buildings?**
We have identified which buildings should fall into Phase 2 of the programme by carrying out a risk analysis based on what we already know about our buildings and our residents living in them. We looked at factors like building height, known construction type and materials, the number of vulnerable residents living there and the existing evacuation policy and fire safety measures.
**12 Southern Housing Group**
## **Supporting our customers**
Our initial response to the pandemic saw us focus on maintaining emergency and critical services, and supporting vulnerable residents. However, over the course of a few months, we re-mobilised core services for all residents while our workforce shifted to agile and remote working. This gave us the opportunity to work and think differently, develop stronger relationships with our residents, and focus on the ways we can listen, empower and be more efficient by embracing digital ways of working.
Over
**103,948** customer enquiries processed by phone, email, webchat and portal in 2020-21
**2,700** vulnerable residents contacted and offered support during the pandemic
**£250k** hardship fund created
Annual Report and Group Financial Statements 2020-21 **13**
**Responding to change** (continued)
Due to the coronavirus pandemic, some residents have lost their job and they reached out to the Group for employment advice and support.
## **How have we helped?**
Since the initial lockdown, we’ve developed our digital support and we now offer more online and over-the-phone services to our customers.
Our Back to Work 2020-21 employment scheme is open to all residents regardless of their age, location or background.
## **We’ve organised:**
– Weekly Zoom webinars with employment specialists
– Help with costs around employment and upskilling – Use of a professional online job searching tool with links to training, CV support and skills assessments
– Signposting to local employment services for continued support
**14 Southern Housing Group**
One of our residents, said:
“My Employment Skills Officer helped me to look at my transferable skills and highlighted them on my CV. She also listened to the issues that affected me around my own physical and mental health situations and has been very supportive. I am now undertaking new courses and upskilling which is really focusing my mind.”
Another resident said “Southern 360* has helped me massively on my road to a new career. I needed a PC to do my study on and got one from the Employment Team (via their Working Opportunities Fund). As a single mum with a disability, I just couldn’t afford one myself. Now I am looking at a brighter future, with the means to go for my dreams.”
*Southern 360 is a part of Southern Housing Group and has been created to strengthen our ongoing commitment to help improve the lives of our residents across all ages and communities.
Annual Report and Group Financial Statements 2020-21 **15**
**Responding to change**
(continued)
## **Looking after our people**
During the pandemic, colleagues across the Group have had to adapt quickly to Covid-safe working practices. From working from home through to looking after our residents in our care homes, we have all been affected. That’s why looking after the wellbeing of our colleagues this year has been even more important than usual.
**£155k**[*] on maintaining safe staffing levels, increased infection control measures and additional PPE required for safe working in our care homes and supported housing schemes.
All offices set up for
**Covid-safe** working practices Technology, equipment and **wellbeing** support to enable home working
*£120k contribution from local authority funds relates to care home and supported housing schemes services
**16 Southern Housing Group**
# **Wellbeing support**
World Mental Health Day on 10 October 2020 was launch day for the Group’s renewed approach to taking care of colleagues’ wellbeing.
We made wellbeing information available for everyone via a free app – Unmind – which has been developed by expert mental health professionals.
We shared information, guidance and signposting on a dedicated area of our Wellbeing intranet site.
We also launched ‘Wellbeing Wednesdays’ to promote positive mental health and general wellbeing every week. We encourage colleagues to take a ‘Quiet Quarter’ and spend 15 minutes every Wednesday to focus on their own wellbeing and what they can do to support it, including:
– Listening to a podcast on the Unmind app – Doing some yoga or stretching exercises in the work space – Going out for a walk in the fresh air
Annual Report and Group Financial Statements 2020-21 **17**
**Responding to change**
(continued)
## **Looking to the future**
## **Our Corporate Plan 2021-24**
While we report against the strategic priorities of our Corporate Plan 2020-23 in this review, we recognise that the external operating environment has changed even since 2019. As a result, we have updated our strategic response, adapting it to the challenges we now face.
Much remains the same, but we have created a new Group Corporate Plan 2021-24.
This updated strategy sets out how we will meet the major challenges facing us: making homes compliant with new building safety regulations; and delivering our contribution to the UK’s target to be a net zero carbon nation by 2050 – while remaining financially resilient as a business. Achieving all this will require significant investment in our homes and technology over the next decade.
**18 Southern Housing Group**
## **Our strategic priorities**
**Our strategic priorities for 2021-24 are:**
**Strengthen our finances**
**Build greater trust, transparency and accountability**
**Invest in our homes, strengthen our communities**
Each of these priorities has been shaped by, and is a response to, the rapidly changing environment we find ourselves in, together with our residents.
**Listen to our residents**
**Empower our people**
Despite the many changes we have faced and which continue to challenge us, we remain true to our purpose and vision to provide high-quality homes, services and care for those in housing need, and to make our customers’ and their communities’ lives better.
Annual Report and Group Financial Statements 2020-21 **19**
20
SouthEtn Housing Group
# **Strategic review**
Chair and CEO’s statement Our external environment Our business Corporate plan 2020-23 Financial review Value for money Risk management Going concern statement Viability statement
**22 24 26 28 52 57 62 66 67**
Annual Report and Group Financial Statements 2020-21 **21**
## **Chair and CEO’s statement**
**Alan Townshend** Group Chief Executive
**Arthur Merchant** Chair of the Board
This year, 2021, marks 120 years since the Group was founded. The world has evolved into a hugely different place since those early days, but we remain committed to our core purpose of providing homes for those in housing need.
## **Building safety**
We invested £14.5m in building safety this year, and this continues to be a key priority for the Group. Following a significant piece of work, we have completed external wall system (EWS) surveys for all our buildings over 18 metres and there are some ongoing remedial work programmes in place. We are now fixing our sights on the next tranche of priority buildings.
The work of our Building Safety Programme is long term and a significant number of our residents are affected by this national issue. We understand how frustrating and concerning this is for residents who are waiting for the completion of EWS surveys and we hear every day from residents wanting answers. Working through the Building Safety Programme and carrying out any necessary remedial work is a clear focus for us.
## **Crown Simmons**
Notwithstanding the huge challenges placed on us and our residents this year, we have continued to adapt and grow, focusing on supporting residents, maintaining services as near to normal as possible and increasing the opportunities for our residents’ voices to be heard.
Safety, value for money and efficiency, robust governance and serving our customers’ needs are the strategic threads which run through our whole operation as we aim to improve our performance and deliver against our financial and service improvement targets.
## **Our financial performance**
Overall, the Group has reported a net surplus for the year of £81.6m (2019-20: £23.5m). In total, we invested £129m (2019-20: £290m) in developing, maintaining and improving new and existing homes.
We were delighted to welcome Crown Simmons to the Group on the first day of the new financial year. Crown Simmons is a well-respected local housing association in Surrey. Bringing more than 600 homes into the Group, its strong local presence has bolstered the Group’s position in the county. Together our two organisations have integrated successfully over the course of the year. We are looking forward to continuing working together to provide a growing number of high-quality homes for people in need and investing together in the Surrey communities we serve. We have received positive feedback from residents since Crown Simmons became part of the Group. I’d like to thank Al Dankis, the former chair of the Crown Simmons Board who retired from the Group’s Board this year, for his hard work in bringing our two organisations together.
**22 Southern Housing Group**
## **Our digital strategy and cyber security**
The Group’s ability to digitise and provide alternatives to face-to-face services is not just for the pandemic. It has become part of our longer-term strategy to make it easier for our colleagues to work effectively and for all customers to access our services. We recognise that our colleagues having the right digital tools to do their jobs, fully integrated systems and access to good data goes hand-in-hand with providing the right digital services for residents. This year we finalised our investment in a new omni-channel communications system and launched our new online repairs service for residents. This was followed by a new online customer portal in the new year, with the implementation of technology and systems in a very short space of time to enable fully agile working for office-based colleagues.
Protecting our business from cyber threats and attacks has remained a key priority for us. In August 2020, we obtained Cyber Essentials accreditation – the government-backed scheme which certifies that we have covered all the essential actions our business should take to protect ourselves from cyber-attacks. This ensures that we have the right controls, processes and systems in place to effectively protect our assets. We will continue to deliver improvements in this area to stay protected.
## **Customer service and resident involvement**
Understandably, it has been a challenging year for customer services. Our customer service centre remained open throughout the year and saw an increase in the volume of calls, emails and other contact. Our strategy has been to focus on safety and we are proud of our teams for delivering 100% compliant gas servicing and communal electrical safety despite the pandemic.
We value our residents’ input and feedback and our dedicated Resident Involvement Team has worked with members of our Customer Scrutiny Panel to create new opportunities for our residents’ voices to be heard and influence our decision-making and ensure we are accountable to those for whom we exist. We are committed to ensuring this continues.
## **Supporting communities**
The urgent need to invest in our communities has never been so evident and this year we invested £1.5m in supporting residents where they live. We’ve seen an increase in the numbers of residents claiming Universal Credit. Food bank usage has risen sharply. As the economic effects of the pandemic continue to bite, we expanded our food pantry concept and supported food banks on the Isle of Wight. We launched a £250,000 hardship fund for residents in need due to the pandemic, and over 100 colleagues volunteered to support vulnerable residents with phone calls and shopping for essentials or collecting prescriptions.
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£1.5m
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invested in supporting residents where they live
We’re proud that even with the backdrop of all this upheaval, our colleagues still found the time and energy to raise £34,000 for our chosen charities this year, through sponsored activities, competitions, events and fundraising quizzes.
## **Thank you**
On behalf of the Board, committee members and the Executive Management Team (‘EMT’), we would like to extend our thanks to all colleagues across the Group for the way you have worked together with dedication and goodwill. To all our residents, thank you for your patience and understanding as we face the challenges of maintaining services under such difficult circumstances.
Our thoughts are with the families and loved ones of all those who have lost their lives to Covid-19.
## **Our strategic focus**
In this financial year (2020-21) we launched a Corporate Plan to cover the period 2020-23. We reiterated our commitment to provide high-quality homes, services and care for those in housing need. We exist to make our residents’ and our communities’ lives better, working as a business with social objectives.
Looking ahead, we have recognised the need to adapt our business again and have agreed a Corporate Plan for 2021-24. This updated strategy sets out how we will meet the major challenges facing us: making homes compliant with new building safety regulations; and delivering our contribution to the UK’s target to be a net zero carbon nation by 2050, while remaining financially resilient as a business. This is going to require significant investment in our homes and technology over the next decade.
We are emerging from this last year having learned lessons and adapted how we work. This will serve us well in the coming years as we renew our commitment to improving the lives of our residents and the communities in which they live.
**Alan Townshend** Group Chief Executive
**Arthur Merchant** Chair of the Board
## **Read more:**
- Building safety on pages 11, 12 and 34.
- Customer service and resident involvement on pages 38-41.
- Supporting communities on pages 42-49.
- Financial review on pages 52-61.
Annual Report and Group Financial Statements 2020-21 **23**
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Our external
environment
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In the 120 years since Southern Housing Group was founded, the world has changed beyond recognition. We have adapted, and continue to do so.
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Covid-19
Building
Regulation
safety
Politics Digital
Banks and Customers
Investors
Housing
crisis
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**24 Southern Housing Group**
The pace of change around us all has accelerated and, as a nation, we face significant immediate and long-term challenges. At the forefront is figuring out how we live in a post-Brexit, post-pandemic world while continuing to tackle the country’s housing crisis and the climate emergency.
These external issues impact our business and inform our strategic response.
There are two significant and long-term trends which will shape where our investment is focused in the coming decades: making homes compliant with new building safety regulations; and making our contribution to the UK’s target to be a net zero carbon nation by 2050.
## **Housing crisis**
The amount of social housing in England and Wales has been in steady decline since the 1980s to the point where the country is facing a major housing crisis. It is particularly acute in London and the South East of England.
In 2019, the 2022-2032 Affordable Housing Funding Requirement for London report[1] found that for London alone, the grant required to deliver a new 2022-32 affordable homes programme of 22,750 social rent homes, 6,500 shared ownership homes and 3,250 intermediate rent homes is estimated to be £4.9bn per year. This is stated to be 48% of the estimated total cost of the grant-funded affordable homes, a figure that is lower than typical government grant rates prior to the financial crisis.
## **Resident voice – rebuilding trust**
The lasting legacy of the tragedy at Grenfell Tower in 2017 has been to emphasise not only the importance of stronger building safety regulations, but also to highlight the relationship between residents and their landlord. The Social Housing White Paper in 2018 found that while some landlords did better than others, residents across the country were consistently not listened to, not respected and, at worst, stigmatised. The charter for social housing residents and the recommendations it outlines, affects the way housing associations work with their residents to rebuild trust and transparency.
We’ve always believed in listening to and empowering residents by working together, and we have been working with residents over the past two years to re-shape how residents’ voices are involved in the decisions that affect their lives, and how we are held to account.
## **Climate change and environmental impact**
Addressing the climate emergency and the environmental impact of building and running our homes is a growing strategic priority for the housing sector. The national target for rented properties is that they must all meet the nationally prescribed goal of Energy Performance Certificate ‘C’ and above by 2030. It is vital that housing associations set a clear pathway to becoming zero-carbon housing providers and developers and make our contribution towards the UK’s target of being a net zero carbon economy by 2050.
## **Digitisation**
According to the G15, around 1.15 million people are on housing waiting lists across the country. Housing associations have a vital role in addressing this issue, but this cannot be done without increased government commitment.
## **Building and fire safety**
Four years on from the Grenfell tragedy, the housing sector is seeing higher building safety standards translate into heightened awareness and diligence among all those involved in developing and providing homes. Specialised safety inspection skills and parts that meet new regulations are in high demand, with supply chains potentially being further disrupted by the pandemic and Brexit.
The cost of building safety works for housing associations inevitably places a constraint on the level of investment in new homes and other services. The cost of building safety works is also affecting some residents and without significant additional government intervention this will grow in the coming years, at an already challenging time for the nation economically.
Across the UK some residents, particularly shared owners and leaseholders, are being impacted by changing building regulations that make it difficult to re-mortgage or sell their home without the right building inspections having taken place and the right result being obtained from those inspections. The building safety programmes and the costs involved will be a significant call on the finances of landlords and residents affected for many years to come.
Digital technology, greater connectivity, faster access to data and the vast potential of artificial intelligence and automation are part of a revolution in the way we live and the way we do business. Broadband and mobile connectivity were the catalysts and, today, the rapid pace of change is enabling businesses to find ways to better service customers’ needs, more efficiently.
The social housing sector is part of this evolution. It is moving with the digital age: from the potential for intelligent connected housing systems, smart components and Building Information Management (‘BIM’); through everyday online services that allow customers to self-serve and gain control over services like their repairs; to agile working colleagues able to access data and systems wherever they are.
Taking advantage of these digital opportunities requires significant investment in our homes and technology. It also means building excellent working partnerships between residents, colleagues and partners in national and local government.
To meet these challenges effectively, we will need to adopt and use the right digital technology to communicate effectively, manage our services and use data safely and wisely.
It will also depend on how we involve residents in service design and empower them with the information, capacity and forums to hold us to account for our progress and performance.
## **Read more about our approaches to:**
> – Our strategic priorities for 2021-24 on pages 28-29.
> 1 The 2022-2032 Affordable Housing Funding Requirement for London report https://www.london.gov.uk/what-we-do/housing-and-land/increasing-housingsupply/2022-2032-affordable-housing-funding-requirement-london
> – Building safety on pages 11, 12 and 34.
> – Resident involvement on page 41.
> – Sustainability on pages 35-37.
Annual Report and Group Financial Statements 2020-21 **25**
**----- Start of picture text -----**
Our business
**----- End of picture text -----**
## **What we do**
## **How we do it**
Southern Housing Group Limited owns and manages high-quality homes in places people are proud to live. Our purpose is to make our residents’ and our communities’ lives better, working as a business with social objectives.
We offer homes to rent as well as homes to buy, or part buy, on a shared ownership basis.
We operate across London and the South East and serve customers living in over 30,000 homes.
We are a not-for-profit business with social objectives, which means that every penny we make and more is reinvested in providing homes for people in housing need.
**----- Start of picture text -----**
Preston Road, Brighton, East Sussex
**----- End of picture text -----**
We work with our strategic partners to develop new homes where they are needed.
We have sought to grow the number and range of housing we can offer current and future residents. As a developer of homes, we are a strategic partner of Homes England and the Greater London Authority. Working in partnership, we are building 2,005 new affordable homes across the capital and the South East by 2025.
## **We manage our homes**
We provide tenancy and property management and maintenance services to our residents, through our own housing management, estate care and Southern Maintenance Services teams, and by working with our partner contractors to deliver repairs and planned works to our residents’ homes.
## **We provide care and support services**
We provide care and support services through Southern 360, which brings together our Independent Living for Later Life schemes, our community investment activities and our Supporting Independence and Care services. Our Supporting Independence and Care services strive to provide person-centred care and support in our care homes and floating support provision.
## **We support our residents and their communities**
Through Southern 360, we are also supporting our residents’ health and wellbeing, and strengthening neighbourliness and communities. We are committed to improving the lives of our residents across all ages and communities.
## **We empower and support our colleagues**
We could not do what we do without the dedication and expertise of our colleagues. We provide wellbeing support, career development and learning and development opportunities to enable colleagues to reach their full potential. We work hard to enable an equal, diverse and inclusive culture built on our core values: we work together, we do the right thing, and we get the job done.
Serving customers living in over **30,000** homes
**26 Southern Housing Group**
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Bow River Village, Bromley-by-Bow, London
**----- End of picture text -----**
## **The value we create**
A safe, decent home in a neighbourhood you’re proud to live in is acknowledged to be of value not only to residents, but to residents’ communities, as well as across wider society and the public sector.
This year we invested £1.5m in communities and making our residents’ lives better. However, that is not the full extent of the value we create as a business with social objectives.
During 2020-21, in common with many housing associations, we have been exploring the various methods available to calculate the wider financial value of social housing tenancies, in terms of the positive impact on our society that a decent, safe, home has. These positive impacts include stable communities, thriving local economies, and savings to the public purse, such as the costs of health and social care, policing and education. In September 2020, our Community Investment and Care committee began to consider these technical approaches to attaching a financial value to the benefits our social housing brings.
We will continue to maximise the positive impact we make.
Annual Report and Group Financial Statements 2020-21 **27**
## **Corporate Plan 2020-23**
This annual report covers the period April 2020 to March 2021 and this strategic review is organised to reflect our Corporate Plan 2020-23 which was in operation during that period.
## **Our vision for the future**
We will be a trusted, caring landlord, listening to our residents, providing highquality homes, services and care in places people are proud to live.
The Corporate Plan 2020-23 has been superseded by an updated strategy covering the period 2021-24 which expanded on the themes in the 2020 plan. We will report against the updated strategy in next year’s annual report.
## **Our purpose**
We exist to provide highquality homes, services and care for those in housing need. Our purpose is to make our residents’ and our communities’ lives better, working as a business with social objectives.
## **Our values**
Our values let everyone know how we work to achieve our vision and strategic objectives. They are:
**We work together,** so that we can make it easy for our residents, colleagues, contractors and partners to achieve more than we could by working alone. By talking, listening and sharing, we work as a team.
**We do the right thing** , so that we can give value to our residents, customers and their communities, always focusing on how we can serve our social purpose. We challenge what we’ve always done to find a better way.
**We get things done** , by doing the basics brilliantly, doing what we say we will, finding solutions and making things happen.
**Read more about our resources:** – Financial review on page 52.
**28 Southern Housing Group**
## **Homes**
## **Our objectives**
- Ensure all our residents have a decent, safe home
- Invest more in maintaining and modernising our homes
||New homes sales 2020-21|Number of
homes|
|---|---|---|
||Open market sale
Shared ownership
Total|17
112
129|
- Provide more homes in the areas we work
- Ensure our homes are sustainable, affordable and energy-efficient.
## **Our commitments**
- Deliver 7,000 homes over the next nine years
- Build on our increasing investment in planned works over the next three years
- Demonstrate the highest health and safety compliance standards
- Ensure every high-rise residential block (HRRB) has a tailored Building Safety Case plan in place by the end of 2022
- Continue to provide decent homes and increase investment in compliance
We remain committed to providing more homes for people in housing need. However, the safety, wellbeing and support of our existing customers, staff and contractors is always our priority. During the pandemic, this has meant some development activities understandably had to progress more slowly than originally scheduled.
The impact of the first lockdown and social distancing restrictions, for example, resulted in considerable delays to completion, particularly at some of the Group’s larger sites. Some sites which were due to complete in the year have experienced delays. The housing sector is undoubtedly facing many challenges. We remain committed to playing our part in overcoming both the housing crisis and the mounting climate emergency.
- Increase our investment in communities and estate care
- Increase overall investment in our properties, measured by our reinvestment KPI
- Increase our investment in proactive maintenance works, improving our ratio of responsive repairs to planned maintenance
- Improve the average energy efficiency of our homes and offices as measured by Standard Assessment Procedure (SAP) and Energy Performance Certificate (EPC) ratings, focusing on the least energy-efficient homes.
## **Our progress during 2020-21**
The Group owns and manages over 30,000 homes across London and the South East. Our aim is to increase this number and the range of housing we can offer current and future residents. We are a strategic partner of Homes England and the Greater London Authority. Working in these partnerships, our plan is to build 2,005 new affordable homes across the capital and the South East by 2025.
Despite the challenging year, which forced a number of interruptions to development work, we handed over 93 new homes and began work on 139 more.
## **Key facts and figures**
|**Key facts and fgures**|||
|---|---|---|
||**2020-21**|2019-20|
|New households created|**2,617**|3,088|
|Total homes in construction
New homes handed over|**883**
**93**|802
419|
|Total homes owned and managed
bythe Group|**30,490**|30,130|
## **Tenure mix (existing)**
General needs
Shared ownership
## **11%**
Leasehold
## **10%**
Housing for older people
## **8%**
Affordable rent
## **4%**
Intermediate market rent
## **3%**
Supported housing **2%**
Private rent
**1%**
## **61%**
Annual Report and Group Financial Statements 2020-21 **29**
**Corporate Plan 2020-23** (continued)
## **Our priorities for the year ahead**
Over the coming year we look forward to completing our programme of sites with Crest Nicholson, with homes forecast to handover on both the Cranleigh and Longcross sites.
Other sites due to complete, such as at Dace Road in Tower Hamlets, which is ahead of programme, and we anticipate starting a phased handover of the 144 homes and commercial space in that development later in the year.
It should be a busy year for two of our regeneration Hidden Homes programme sites, in Shoreham-by-Sea and Hackney, both of which are due to start on site in the first half of the year.
Also on the schedule for the year will be the start of the first phase of the exciting harbour regeneration in Shoreham-by-Sea, which should deliver 137 affordable homes, associated commercial space and high-quality landscaping and public amenity space.
**Dace Road, Tower Hamlets: Shoreham-by-sea:** phased handover of first phase of **144 137** homes and commercial affordable homes, associated commercial space later in the year space and public amenity space
**Key development locations 2020-21**
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Vanston Place Samuel Square
Fulham Kensington
Rose Garden
Cranleigh, Surrey
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**----- Start of picture text -----**
The Hantons Preston Road
Hove, Brighton,
East Sussex East Sussex
**----- End of picture text -----**
**30 Southern Housing Group**
## **Focus on: Free Wharf**
Shoreham-by-Sea
In March 2021, the Group took back possession of the site known as Free Wharf, in Shoreham-by-Sea. This was the culmination of over two years of complex decontamination and enabling works. These works included the construction of a new river wall, flood defences, decontamination, and other preparatory works that will facilitate the residential phases of the development.
The site is prominently located within easy walking distance of the town centre and train station, and has potential for strong housing value growth, given that its location captures overspill from Brighton and Hove and is situated in the beautiful setting of the South Downs, on the banks of the River Adur.
The Group is currently preparing to bring forward the first residential phase of 137 much-needed affordable homes, consisting of 40 homes for affordable rent, 97 homes for shared ownership, and 1,300m[2] of commercial space. The site is viewed as an important catalyst to the wider regeneration of the harbour area, while this first phase will start creating a sense of place and help prospective purchasers to understand the development’s ambition and vision.
The 7.5 acre site was purchased in 2015, and planning for 540 homes and 2,300m[2] of commercial space was agreed in the summer of 2018. The site is on the western arm of Shoreham Harbour, an area that has been zoned for regeneration by Adur District Council, with the objective to create “a new residential-led, mixed-use neighbourhood, with a reinvigorated and accessible waterfront, with a range of commercial opportunities to strengthen the overall offer of Shoreham-by-Sea”.
**First residential phase:**
**----- Start of picture text -----**
First residential phase:
New public realm Free Wharf, Shoreham-by-Sea
137
much-needed affordable
homes consisting of:
40
homes for affordable rent
ownership
New pontoons and moorings, Free Wharf, Shoreham-by-Sea Free Wharf viewed from the South side of the
Western Harbour Arm, Shoreham-by-Sea
**----- End of picture text -----**
**137** much-needed affordable homes consisting of: **40** homes for affordable rent **[97]** homes for shared ownership
**----- Start of picture text -----**
Free Wharf viewed from the South side of the
Western Harbour Arm, Shoreham-by-Sea
**----- End of picture text -----**
Annual Report and Group Financial Statements 2020-21 **31**
**Corporate Plan 2020-23** (continued)
## **Focus on: Preston Road** Brighton
Situated on the outskirts of Brighton, this scheme of 28 homes, constituting 8 for affordable rent flats and 20 for shared ownership, completed in September 2020.
The site was acquired in January 2017, under a 155-year lease from Brighton and Hove. It sits in a conservation zone with planning restrictions and the grounds contain very mature trees that are the subject of Tree Preservation Orders.
The development comprised the conversion of two existing Victorian villas, from the late 1800s, into 14 spacious shared ownership flats. A link building between the two was replaced to accommodate 8 new affordable rent flats, with extensive landscaped grounds that also contain 6 shared ownership houses.
**----- Start of picture text -----**
28 8
homes in total, new affordable
comprising: rent flats
14 6
spacious shared shared ownership
ownership flats houses
Preston Road, Brighton, East Sussex
**----- End of picture text -----**
**----- Start of picture text -----**
Focus on:
The Group’s Hidden Homes programme
Regeneration
Hidden Homes is the Group’s ongoing
programme to assess all our stock with the aim
of identifying 500 ‘hidden homes’, through the
use of under-developed land on existing estates
or the regeneration of estates or blocks that
are no longer fit for purpose or have become
uneconomical to manage and maintain.
Over the last year, planning permission has been secured
on 190 homes and we have focused on getting these
schemes into contract and on to site.
We have made good progress on two of the larger schemes
in the programme, the Kennaway Estate in London and the
Mannings in West Sussex, working to relocate households
appropriately to enable construction to commence on both
sites during summer 2021.
The Resident Involvement Team engaged with residents
from both estates in the contractor selection process.
They helped evaluate tender returns, wrote interview
questions, and were part of the assessment panel attending
post-tender interviews. This enabled greater scrutiny and
transparency and ensured the requirements of our residents
were fully considered by the contractors.
We continue to evaluate further opportunities for
development and are taking a pipeline of schemes through
the evaluation and feasibility process. Included in this are
several opportunities which have been brought to the
Group through the Crown Simmons merger.
Rose Garden, Cranleigh, Surrey
**----- End of picture text -----**
**32 Southern Housing Group**
**Kennaway Estate regeneration, Hackney, London** It is hoped that work will commence on the Kennaway Estate in the summer of 2021. The development will deliver: **19 6** for social rent for shared ownership **61 12 24** homes in total, comprising: for affordable rent for open market sale
Annual Report and Group Financial Statements 2020-21 **33**
**Corporate Plan 2020-23** (continued)
## **Investing in safety**
## **£14.5m invested in building safety in 2020-21**
Safety is embedded at every level of our organisation. The Board oversees our risk appetite and risk management, and our Customer Safety Committee oversees all safety related matters whether buildings, staff or reportable incidents. Our Building Safety Directorate delivers the Group’s Building Safety Programme, while our Customer Services, Sales Services and Communications Teams all actively engage with and support our residents.
## **Key facts and figures**
|**Key facts and fgures**||||
|---|---|---|---|
|Measure|**2020-21**|2019-20|2020-21
target|
|Gas servicing|**100%**|100%|100%|
|Communal electrical safety|**100%**|99%|100%|
|In-dwelling electrical
programme
Overdue FRA1inspections|**42%**
**15**|28%
n/a|40%
0|
|Overdue FRA P02actions|**0**|n/a|0|
|Overdue FRA P13actions|**175**|n/a|100|
|Overdue NOD4actions|**3**|n/a|0|
|Water (legionella testing)|**100%**|100%|100%|
|Asbestos survey|**99%6**|99%|100%|
- 1 Fire risk assessment: Type 1 Fire Risk Assessment (FRA) is a non-intrusive survey. It assesses all the common parts of a building, such as the lobby area in a shared block of flats, but not individual dwellings.
- 2 Priority 0: Action that poses an urgent risk to residents. Actions should be completed within 24 hours.
- 3 Priority 1: Action that poses a high risk to residents. Actions should be completed within a 30-day timeframe. Of the 175 actions identified at year-end, 142 remain outstanding. Every P1 action is tracked and monitored on a weekly basis by the Building Safety Team, which ensures progress is made and the appropriate interim additional safety precautions and mitigations are in place.
- 4 Notice of deficiency: identifies provisions and/or procedures that the Fire Authority considers as either lacking or not suitable and sufficient regarding the building. Work to close the three outstanding NODs is well advanced and progress is overseen by the Customer Safety Committee.
- 5 Outstanding FRA inspection completed on 1 April 2020.
- 6 One survey out of 1,445 was overdue on 31 March 2021. That survey was completed on 8 April 2021.
- n/a = new Board KPI for 2020-21.
## **The Group’s Building Safety Programme** The safety of our customers is our first priority.
This work is significant both in terms of our financial commitment – we invested £14.5m this year alone on building safety work – and in terms of our commitment to engage and support our residents. Many of them are deeply concerned about the national building safety crisis and the impact on them personally, both financially and on their wellbeing.
We are committed to completing our Building Safety Programme as efficiently and effectively as possible. We are using our procurement frameworks to ensure we deliver value for money in both the costs of surveys and in any remedial work that is needed as a result. Prioritising our buildings according to risk is the right thing to do but it does mean that some residents may have to wait for years before we can carry out EWS surveys on their buildings. We will support our residents with a range of measures as needed during this time.
## **Introducing Building Information Modelling (BIM)**
In response to the Building Safety Bill and its requirement for a ‘Golden Thread’ of building data, the Group’s Building Information Modelling (BIM) strategy was approved in July 2020. Its overarching aims are to ensure the Group meets the draft Bill’s obligations and increases the quality of our new homes.
- Our BIM related key objectives include:
- Creating and maintaining a suite of standard appointments and contract documents
- Pursuing ‘software neutrality’ to avoid dependence upon a single package or service provider
- Ensuring close collaboration with the Group’s Asset Data Architecture and SharePoint Online projects
- Ensuring that in the future we are able to effectively use BIM for our current development programme portfolio.
Progress is being measured against two categories:
- **BIM implementation** , which tracks best practice and emerging regulator expectations, translating these findings into measurable actions and updating our standard contract documents, processes, and procedures, and
- **BIM delivery** , which reports on the usefulness of these new tools against some key performance indicators, such as BIM cost per project and speed of roll out.
As a responsible landlord, we have an ongoing programme in place to check our buildings and carry out any work required to ensure that our buildings comply with the government’s guidance.
We have completed external wall system surveys (EWS surveys) on all our tall buildings and our programme to complete EWS surveys and intrusive Type 4 Fire Risk Assessments (FRAs) on the balance of our approximately 1,400 buildings is underway.
Alongside the Type 4 FRAs and EWS surveys on all the tall buildings we own, we have recruited Building Safety Managers, each of whom have a number of tall buildings to manage. Regular safety checks are being established and building information collated. This work will be developed into tailored building safety case plans, on which we are liaising with G15 peers, in line with regulatory requirements, as they become more defined.
**34 Southern Housing Group**
## **Sustainability**
We are committed to reducing our impact on the environment and to providing comfortable, energy-efficient homes with low running costs for our residents. We do this through our Environmental Sustainability Strategy and Policy as well as our Development and Asset Management strategies.
Our aim is to build high-quality, energy-efficient homes, helping to make progress towards the elimination of fuel poverty while reducing carbon emissions.
Our current strategy runs until 2022. During 2020-21, we began our research and analysis into a new strategy that will set out our pathway to net zero carbon and determine the best ways we can take forwards our work on energy efficiency, fuel poverty, biodiversity and waste reduction.
During the year, we launched the Biodiversity Toolkit for Housing Associations. The toolkit was developed in partnership with the UK Centre for Ecology & Hydrology following a successful 18-month pilot project at our estates in Bracknell, where we introduced wildflower meadows, more native plants, and bird, bat and bee boxes. The toolkit has been rolled out to our Estate Care teams to encourage simple shifts that support biodiversity. It is available to all online at www.shgroup.org.uk/about-us/ sustainability/biodiversity.
Between 2019-20 and 2020-21, average Standard Assessment Procedure (SAP) ratings improved slightly for existing stock but fell slightly for new homes. Our goal is to sustain an overall SAP rating, which is one measure of the energy efficiency of a property, of at least 71 annually between 2018 and 2022. This is enabled by both our planned works programme and our new build development programmes.
|
development programmes.|||
|---|---|---|
||**2020-21**|2019-20|
|New homes SAP rating
Overall SAP rating(rented tenures)|**84.0**
**72.6**|84.7
72.4|
## **Focus on the Biodiversity Toolkit**
Working with Southern Housing Group, ecologists at the UK Centre for Ecology & Hydrology (UKCEH) launched the ‘Biodiversity Toolkit’ to enable housing providers and residents to support wildlife on their estates.
The toolkit provides a range of ways to improve biodiversity on housing estates. These options can be tailored according to housing density, budget available and the level of maintenance possible.
Available digitally, it includes more than 20 wildlife management options that are suitable for housing developments. It also provides a guide on how best to improve green spaces for wildlife, while involving residents in key decision-making.
UKCEH is encouraging other housing providers across the UK to use the toolkit to make changes in management practices on their estates. This will provide much-needed habitats for wildlife and improve their residents’ health and wellbeing.
Jodey Peyton, UKCEH ecologist, said, “Urban development is one of the causes of habitat loss, deterioration and fragmentation of natural areas. This has led to significant declines in a wide range of animal and plant species, particularly over the past 50 years.”
“Green spaces in urban habitats have great potential for supporting lots of wildlife and improving people’s wellbeing. Our new toolkit advises housing providers and residents on measures they can implement themselves, offering a range of affordable and achievable wildlife management options to help reverse the long-term decline in biodiversity in urban areas.”
We ran a pilot scheme introducing some wildlife-friendly measures on a Southern Housing Group estate in Bracknell last year. The variety of wildflowers was increased through both planting and by leaving a proportion of grassland unmown. Shelters for bees and other invertebrates, including so-called ‘bug hotels’, were distributed around the estate along with bird and bat nesting boxes on trees and buildings.
Patryk Szczerba, Southern Housing Group’s Sustainability Manager at the time, said: “We were delighted to be involved with this project. As a business that develops land in both rural and urban settings, we’re determined to encourage the return of wildlife to the built environment. It can be as simple as making a slightly different choice of plants for a hedgerow or grassy area. A commitment to biodiversity doesn’t need to come with high financial or human resource investment.”
UKCEH’s work on the toolkit was funded by a grant from the Natural Environment Research Council.
Annual Report and Group Financial Statements 2020-21 **35**
**Corporate Plan 2020-23** (continued)
## **Southern Housing Group Streamlined Energy and Carbon Reporting (SECR) 2020-21**
Under changes introduced by the 2018 Regulations, large unquoted companies are obliged to report their UK energy use and associated greenhouse gas emissions as a minimum relating to gas, electricity and transport fuel, as well as an intensity ratio and information relating to energy efficiency action, through their annual reports. Southern Housing Group has opted to voluntarily disclose its energy use on a similar basis.
## **Carbon Footprint in corporate offices, buildings and in communal areas**
For the purpose of this SECR Carbon Report the Group has included gas and electricity usage for the financial year 2020-21 for the following offices, and included intensity ratios (kgCO2e per office square metre) where available. Total CO2e emissions for our offices from gas and electricity usage were 459.76 tnCO2e. This was a 19.6% decrease compared to 2019-20 (571.87 tnCO2e), due to the reduced office use during the coronavirus pandemic and the Group’s adoption of increased remote working.
|Offce|Energy usage
Carbon Footprint
tnCO2e
Intensity ratio
kgCO2e/m²
Electric
kWh
Gas
kWh|
|---|---|
|Fleet House, 59-61 Clerkenwell Road, London, EC1M 5LA|224,102
None
52.25
14.05|
|Spire Court, Albion Way, Horsham, West Sussex, RH12 1JW|676,548
388,225
229.11
32.06|
|The Courtyard, St Cross Business Park, Newport, Isle of Wight, PO30 5BF|71,915
37,653
23.69
25.67|
|The Oasts, Newnham Court, Bearsted Road, Maidstone, Kent, ME14 5LH|63,560
None
14.82|
|Bow River Village, 2 Pintle Place, Hancock Road, London, E3 3UP|14,757
None
3.44|
|CourtneyKingHouse, 169 Eastern Road, Brighton, East Sussex, BN2 0AP|45,717
638,740
128.10|
|Hooper Court, 4 The Hard, Portsmouth, PO1 3PU|6,889
None
1.61|
|Mount Pleasant, 251 Mount Pleasant Lane, Mount Lane, Bracknell, RG12 9AB
28,891
None
6.74||
|**Total emissions**
**459.76**||
Energy efficiency actions taken
- Reduced use of offices with consequent reduction in energy consumption.
## Methodology
- Carbon emissions from electricity = electricity usage in kWh x emission factor 0.23314 kgCO2e
- Carbon emissions from gas = gas usage in kWh x emission factor 0.18387 kgCO2e.
**19.6%** reduction in office carbon emissions compared to 2019-20
**36 Southern Housing Group**
## **Carbon footprint from staff mileage**
Total CO2e emissions from staff mileage (for business use) was 213.19 tnCO2e, that is 0.2932 kgCO2e per mile. This represents a 44.4% reduction compared with the prior year, with the coronavirus pandemic having a significant impact on travel. Emissions are calculated by multiplying mileage x emissions factors and dividing the result by 1,000.
**44.4%** reduction in staff mileage (for business use) compared to 2019-20
|
the result by 1,000.|
compared to 2019-|
20|
|---|---|---|
||2019-20|**2020-21**|
||CO2e
emission factor
kg
Mileage
Miles
CO2e
emissions
tnCO2e|**CO2e**
**emission factor**
**kg**
**Mileage**
**Miles**
**CO2e**
**emissions**
**tnCO2e **|
|Motorbike (125cc to 500cc)petrol|0.16559
1,712
0.28|**0.16559**
**9,046**
**1.50**|
|Staff Car (1.4L to 2.0L)petrol|0.30045
1,238,124
383.14|**0.30029**
**704,958**
**211.69**|
|Pedal Cycle|0
11,268
0|**0**
**13,234**
**0**|
|**Total**|**383.42**|**213.19**|
Energy efficiency actions taken:
- Group-wide take up of remote working, including greater use of agile tools and software such as video calling and conferencing
- Reduction in travel between offices and sites as a result of the pandemic.
Total mileage fell from over 660,000 miles in 2019-20 to just under 157,000 miles in 2020-21 as a result of the coronavirus pandemic travel restrictions. No other energy efficiency or carbon reduction actions were taken.
## **Conversion factors**
## **Carbon footprint from fuel used in fleet vehicles and company cars**
Total CO2e emissions from fleet vehicles and company cars mileage was 53.48 tnCO2e, that is 0.34 kgCO2e per mile. This was calculated using the mileage and emissions factors below:
All the conversion factors used in this report accord with the Government’s emission conversion factors for greenhouse gas company reporting, some of which change annually. Greenhouse gas reporting: conversion factors 2020 – GOV.UK (www.gov.uk)
- Van Class I (up to 1.305 tonnes) petrol =
- 154,659 miles x 0.33923 kgCO2e emission factor
- Company Car (type Executive) petrol =
- 2,775 miles x 0.36532 kgCO2e emission factor.
Annual Report and Group Financial Statements 2020-21 **37**
**Corporate Plan 2020-23** (continued)
## **Customers**
## **Our objectives**
- Listen to our customers, develop trusted relationships
- Be easy to do business with
- Excel at customer service
- Provide excellent care and support services to people that need them.
## **Our commitments**
- Increase the opportunities for residents to scrutinise and shape how services are provided
- Increase resident involvement in the safety and improvement of our services, estates and neighbourhoods
- Increase the number of customers who find it easy to do business with us, feel listened to and would recommend us to friends and family
- Increase our overall customer satisfaction and reduce complaints by 10% year-on-year
- Maintain and seek to improve our Care Quality Commission
- (CQC) regulatory ratings.
## **Our progress during 2020-21**
## **Key facts and figures**
## **Listening to our customers**
Listening to our customers was more important than ever during the pandemic. That’s why we paused our normal survey programme and instead, we directly consulted customers on the kinds of communications and activities they needed from us in a changing and unprecedented environment. This shaped our communication approach as we sought to keep customers updated on our services, which themselves were being adapted in response to evolving guidance from the government.
By December 2020, we had established a common thread in the pandemic feedback, and so reinstated our normal satisfaction surveys to ensure that a comparison could be made with prior years. Around a third of our usual survey volume was completed (720), with customer satisfaction reported at 74%, compared to the previous year’s 83%. This, in part, was driven by the general dissatisfaction with life during the pandemic seen across all sectors of the economy. It also reflected the frustration felt by customers who experienced difficulties when accessing the Group’s services.
Our ability to recover our customers’ trust will depend on how well we can tackle backlogs built up during lockdown restrictions and our success in creating new digital services. Nevertheless, the score of 74% is not dissimilar to that achieved in the years 2016-19, which suggests the actions we took to increase satisfaction in 2019-20 were the right ones to prioritise as we return to a more normal way of working.
## **Service levels**
|**Key facts and fgures**||||
|---|---|---|---|
|Customer enquiries
processed by phone,
email, webchat
andportal|2020-21
103,948|2019-20
79,134|2018-19
79,035|
|Customers surveyed||||
|per month
Incoming calls
handled
Net Promoter Score|78
190,789
34*|626
224,963
42|600
212,000
26.1|
|Net Ease Score|27*|27|19.1|
|Overall Customer||||
|Satisfaction
Overall Satisfaction
with Repairs
Void turnaround time
(days)|74%**
88%
29|83%
83%
16|73%
79%
22|
|Emergency repairs||||
|completed within||||
|24 hours|93%|93%|99%|
By the end of March 2021, contact and work volumes in most areas were at a similar level to the year before, but the pattern was very different. The first quarter saw a big reduction in contact and some services – such as lettings – were completely stopped by pandemic restrictions. Services were reintroduced with great care over the summer and early autumn months, especially where sheltered residents were involved, many of whom were shielding. As we entered the winter months, through a combination of digitisation and adapting our ways of working, our teams began to deliver many services as normal, or at least very close to it.
In the run up to Christmas, demand began to pick up at the same time as we saw increased sickness and self-isolation absence among our colleagues. From the New Year, demand strongly resurged and complaint volumes rose accordingly, with customers demonstrating anxiety and frustration at the increased effort needed to access or receive our services. The learning from this experience is critical and our actions to ensure that we learn from complaints are set out later in the section, ‘Learning from complaints’.
- based on 100 respondents.
- ** based on 634 respondents (general needs, housing for older people and affordable rent residents).
**38 Southern Housing Group**
## **Looking forward**
## **Making it easy to do business with us**
The Group’s ability to digitise and provide alternatives to face-to-face services is not just for the pandemic but has become part of our longer-term strategy to make it easier for all customers to access services.
We have been improving our online customer services portal, gradually bringing our repair service online. We are excited to be working on many new services which will enable customers to self-serve on a platform that is available 24/7. Our ambition is to provide ready access to our services for digitally-engaged customers, without removing the phone service – or indeed written post service – that some customers continue to rely on.
The Group’s customer contact centre remained open throughout the pandemic, although with reduced hours for phone calls to help staff manage the volumes of emails and portal messages. Taking calls, particularly where customers are frustrated or angry, is difficult for colleagues who are home working, particularly if their home set-up is not ideal or where they have had to share space with their children or parents. Priority was given to returning contact centre teams to the office whenever this was feasible within the restrictions at the time.
Our ambition for the next 12 months is to rebuild the services that have been impacted by the pandemic with more digital options available to recover customer satisfaction and ensure that we are making it easy, whichever way our customers choose to contact us.
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OVERVIEW
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STRATEGIC REVIEW
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Transferring to a new, omni-channel platform in November greatly improved the team’s capacity for digital contact, especially web chat, and from that point almost half of all customer contact came via channels other than the phone, showing a real demand from customers to engage with the Group digitally.
Annual Report and Group Financial Statements 2020-21 **39**
**Corporate Plan 2020-23** (continued)
## **Learning from complaints**
We know there will be times when we don’t get our services quite right and residents may decide to complain about the service they have received. While we always want things to go right first time, complaints provide us with a valuable opportunity to listen, learn and make improvements to our services.
Last year the Housing Ombudsman introduced a new Complaint Handling Code as part of the revised ombudsman scheme. The new code set out to establish some best practices in handling complaints and covers areas such as making our complaints procedure easily accessible, suitable responses and improving by learning from complaints.
Our Complaints Handling Code and most recent self-assessment are available here: **https://www.shgroup.org.uk/ media/1023296/southern-housing-group-complaintshandling-code_final.pdf**
Our Complaints Policy is here: **https://www.shgroup.org.uk/media/1023020/complaintspolicy-dec-2020.pdf**
Our approach to learning from complaints is simple: we carry out a review of each complaint to understand the root cause and then work with colleagues and contractors to put it right. We also hold a quarterly Steering Group with colleagues and residents where we look at all the improvement themes and ensure we have a joined-up approach to improving our services. Together, we build an action plan and check back to make sure we’re delivering against it.
The first of these Steering Group meetings took place at the end of April 2021 and we agreed to provide refresher training to employees on delivering great service. We are also looking at how we can better manage the replacement of boilers.
In addition to this, we have a number of operational improvements underway including how we manage missed appointments with contractors and how we keep residents updated effectively, every time.
It’s important that we’re open and transparent with our customers about how we’re doing, so we publish a report and more information on how we learn from complaints on our website every month.
## **Our actions**
We’ve been hard at work looking at how we learn from complaints and understanding the root causes of any dissatisfaction. We now have a dedicated team, and processes, to make sure that we learn from every single complaint we receive.
Further information can be found on our website here: **https://www.shgroup.org.uk/about-us/our-performance/ learning-from-complaints/**
**40 Southern Housing Group**
## **Resident involvement**
Our Resident Involvement Team exists to proactively increase the opportunities for our residents to scrutinise and shape how our services are provided. The Group’s resident involvement strategy has been revised and strengthened following the publication of the government’s Charter for Social Housing Residents: Social Housing White Paper and the Housing Ombudsman Complaint Handling Code. The strategy prioritises communication, repairs, service, and respect.
**Key facts and figures 355** actively involved residents **1,287** responses to involvement opportunities (residents taking part in multiple opportunities throughout the year) **64** projects completed **12,506** hours of dedicated involvement time **12%**
of residents invited to participate responded
## **How our residents got involved**
Online surveys Email **219 (15%)** Post **335 (23%)** Phone **154 (11%)** Face-to-face **17 (1%)** Virtual meeting **152 (10%)**
**582 (40%)**
Throughout the year, the Resident Involvement Team promoted opportunities to involve residents and explored avenues to reach out further to ensure the widest possible resident voice was heard.
This year we focused on the following resident involvement initiatives:
- The Steering Scrutiny Group and Resident Scrutiny Group undertook their first scrutiny exercise looking at the Complaint Handling Process including changes to the Policy to reflect the requirements of the Housing Ombudsman Complaints Handling Code. Recommendations from that scrutiny exercise are being actioned. Prior to the scrutiny review, residents from the wider involved list participated in focus groups that helped inform change to the Complaint Policy. Residents have also been involved in reviewing complaints communication.
- – The Resident Involvement Team progressed with setting up a Homeowners Group. Homeowners interested in being part
- The Resident Involvement Team progressed with setting up a Homeowners Group. Homeowners interested in being part of this Group have provided feedback about the service they receive and what areas of this service they would like to see improved. This feedback has been shared with colleagues responsible for Housing Management, Section 20 consultation, and service charges. Communication has been identified as the priority and the Homeowners Group will help us to scope the next steps to improve this aspect of our service.
- In response to the pandemic, the team undertook a digital inclusion survey with involved residents to identify current access to digital engagement. The team supported residents to join online focus groups and engagement opportunities. To involve residents unable to access online meetings the team reviewed its offer to include telephone calls and one-to-one support. Residents who would like to be involved digitally but did not have equipment or skills were directed to Community Investment digital inclusion initiatives.
- Training has been provided to residents who expressed an interest in procurement and contract review. The trained residents have taken part in the Careline re-procurement, the tree work procurement, and the procurement of a large regeneration project. Four residents are now undertaking contract review roles relating to the Alliance Contract working closely with the Property Maintenance and Investment Team.
- Residents have been working with our Building and Fire Safety Teams to scrutinise how we meet our obligations to ensure that their homes and buildings are safe. This includes developing our Fire Safety Involvement Strategy.
## **Priorities for next year**
The Resident Involvement Team have a busy year planned with their key priorities being to:
- Embed resident involvement further into the Group’s governance structure to ensure that our resident voice has influence from the Board down
- Review our strategy to respond to the requirements of the Social Housing White Paper
- Work with our resident groups to obtain Resident Involvement Accreditation
- Support residents to engage in the ways they would like.
## **Thank you**
We are very grateful for the time and effort our Customer Steering and Scrutiny Group members bring to helping us understand and improve our service.
Annual Report and Group Financial Statements 2020-21 **41**
**Corporate Plan 2020-23** (continued)
## **Southern 360 care and support services for residents**
We are proud that during this very challenging year for both the Group and our residents, we have been able to maintain our care and support services to some of the Group’s most vulnerable residents in almost a business-as-usual capacity.
Working closely with our partners at the Isle of Wight Council and the Care Quality Commission we have supported our residents and colleagues with an absolute focus on health and safety and regulatory compliance, in Covid-safe working and living conditions. This has at times been a significant challenge for our residents as inevitably there have been limits and restrictions placed on how they can live. During this period, through detailed planning and with the utmost caution, we have also been able to let our brand new Extra Care Scheme at Ryde Village on the Isle of Wight. The service is transforming the lives of its new residents and, such is the local demand, we currently manage a waiting list for the scheme.
## **Support services**
Our Southern 360 support services comprise hostel-based accommodation and support as well as ‘housing first’ type accommodation and support delivered across the Isle of Wight.
## Homeless family service
In April 2020 we were awarded the new contract to deliver a Homeless Family Service across the Isle of Wight. We are contracted to house 26 families in different sized accommodation on assured shorthold tenancies which will convert to assured tenancies at the end of two years.
Single homeless pathway service
From 1 November 2020 the new Single Homeless Pathway Service was launched. This service was a result of the Isle of Wight Council commissioning a different approach to managing homelessness on the Isle of Wight. We work in partnership with the Isle of Wight Council and other support providers to create a pathway out of homelessness.
Learning disability – supported living and outreach We deliver a supported living service to up to 25 individuals with learning disabilities and autism. The supported living accommodation is varied to suit the different preferences of individuals looking to live more independently. Our customers are a close-knit community and often socialise across the schemes.
We also provide an outreach service to people living in the community but not necessarily in our supported living schemes. On average we support approximately 60 people across the service.
Overall customer satisfaction levels with these services were 99% (2019-20: 93%) and all our registered care services were rated as ‘outstanding’ or ‘good’ by the Care Quality Commission (CQC).
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Caddie, our resident disability dog, supporting our
innovative approach to maximising residents’ independence
**----- End of picture text -----**
Overall customer satisfaction levels with these services were
## **99%**
**42 Southern Housing Group**
## **Focus on: Caring on the front line**
Care homes across the UK have been at the frontline of the pandemic. At the start of lockdown, the main aim of our care staff was to ensure that residents remained as safe as possible and had the least disruption to their daily lives.
However, as government guidelines changed, some of our care homes were able to introduce socially distanced visiting in the garden area where residents greeted visitors through open doors or windows. To support residents’ wellbeing, staff also put together events and activities that were safe for residents to participate in.
Naomi Keyte, Head of Sheltered and Care Services, said, “I am extremely proud and humbled by the continued dedication and commitment of our staff to help our residents keep well and safe during this challenging time. One example is providing a safe space for residents to see their families. By using a dedicated room, specialist equipment and personal protective equipment, relatives and loved ones could keep in touch with residents which supports their physical and emotional wellbeing.”
Emma Bound, Manager at 22 Argyll Street, said, “We managed to secure a private slot at the swimming pool. We have it once a week for one hour and they give us time to change afterwards, as they understand that this can take us some time due to our residents’ physical needs. We are so pleased about this, as we have seen our residents’ physical health deteriorate over the last few months because they haven’t been able to access their usual activities.”
Mike Janvrin, Senior Clerical Carer at Byrnhill Grove, said, “Here at Byrnhill Grove, we have reintroduced the hairdressing services and our local minibus tours. We’ve been following all guidelines to keep everyone safe.”
And our colleagues’ dedication and professionalism hasn’t gone unnoticed by some of our supported care residents either. Kelly, one of our residents, said, “I want to thank you all for the service I have been getting these past months. Although, I have been with Southern Housing Group for over 18 years, I know the last eight months have been hardest for your staff.”
Annual Report and Group Financial Statements 2020-21 **43**
**Corporate Plan 2020-23** (continued)
## **Communities**
## **Our objectives**
- Invest more in creating sustainable estates and neighbourhoods that people are proud to live in
– Improve the lives of our residents and their communities
- Work with our local partners to improve our residents’ communities
## **Our commitments**
- Increase the number of customers we help with our financial inclusion and employment support services
- Maximise the income we help generate for customers through our interventions
- Increase our investment and impact in communities
- Increase awareness of our role in communities
## **Our progress during 2020-21**
**Southern 360 – community investment and care services** Making lives better, supporting independence and improving communities is at the heart of what we do as an organisation. Southern 360 is committed to making meaningful contributions to people’s lives and helping local communities thrive.
**Key facts and figures**
**£1.5m** invested in our communities
**4,389** people benefitted from Group-wide grants
**8,538** customers benefitted from our community investment support
**£215k** of social value gained from our supply chain
**£450k** Group-wide grant invested in residents and their communities
## **100+**
Colleague volunteers supporting residents, communities and community projects
**£5.3m** income generated for the benefit of customers
## **£24k**
community grants to help charities cope with the impact of Covid-19 including to foodbanks with over 1,600 beneficiaries
**£691k** funding leveraged through partnerships
## **Southern 360 community investment services cover a range of different functions**
- **Financial inclusion service** – a team of Financial Skills Officers delivering one-to-one tailored support
- **Southern 360 hotline** – a dedicated team triaging residents’ needs and making onward referrals, the hotline is the first point of contact for any of our Southern 360 community investment services
– **Employment, skills and training** – a team of Employment Skills Officers, working in partnership with national, regional and local organisations to provide a range of opportunities to support residents with work and training related activities
- **Partnership working** – through a wide range of partnerships we are able to leverage funding to develop and sustain partnership projects to support our residents and their communities
- **Volunteering and paid work placements** – support for residents wanting to give something back to their communities and those who wish to develop their skills and confidence to help them secure work
– **Social value** – maximising our leverage through SHG contracts to support all aspects of our community investment activities
– **Grants programme** – individual and small group grants can be applied for through our Making Lives Better fund, supporting personal progression and small-scale community activities with grants up to £5,000. Large community grants and project funding over £5,000 can be funded from our Making Communities Better grant fund
- **Community centres** – we own 17 Centres, predominantly in and around London. These host a variety of community groups and activities that benefit local people and their communities
- **Digital skills** – through a joint programme with national training provider We Are Digital, we offer our residents up to six hours of free digital skills training and, where possible, access to free digital equipment.
**44 Southern Housing Group**
## **Grant spending**
In 2020-21, we allocated over £450,000 in grants across 45 local authority areas.
## **Grant spend by local authority area 2020-21**
**----- Start of picture text -----**
Group stock number
£35,000 3,500
£30,000 3,000
£25,000 2,500
£20,000 2,000
£15,000 1,500
£10,000 1,000
£5,000 500
£0 0
Local Authority
MCB Actual Spend/MLB Approved Spend
SHG Stock
Approved grant spend by theme
£120,000
£100,000
£80,000
£60,000
£40,000
£20,000
£0
Q1 Q2 Q3 Q4
Tackling Poverty
Neighbourliness and Community
Health and Wellbeing
Islington Newham Tower Hamlets Hackney Isle of Wight Dover Brighton and Hove Barking and Dagenham Woking Waverly Runnymede Kensington and Chelsea Southwark Reigate and Banstead Elmbridge Folkstone Hammersmith and Fulham Greenwich Portsmouth Lewes Mid Sussex Crawley Horsham Arun Ashford Canterbury Reading Waltham Forest Tonbridge and Malling Gosport
**----- End of picture text -----**
Annual Report and Group Financial Statements 2020-21 **45**
**Corporate Plan 2020-23** (continued)
## **Income granted 2020-21 and 2019-20**
**----- Start of picture text -----**
£6,000,000
£5,000,000
£4,000,000
£3,000,000
£2,000,000
£1,000,000
£0
Q1 Q2 Q3 Q4 Total
2019-20
2020-21
**----- End of picture text -----**
Total income generated during the year 2020-21 was £5,252,020, up by £1,607,549 from the previous year. External partnerships generated £180,679 of the overall total through projects such as the East End CAB debt advice service, Kennedy Scott and food pantries. The Southern 360 hotline contributed £443,776 to this income total, which is an increase of £20,000 on last year’s performance.
We were able to access Family Action funding this year to support residents through Covid-19 related hardship and this represented £189,565 of the income generated.
## **Covid-19 related community support**
In November 2020, we formed a partnership with the Family Action Fund and became a registered referral partner. This allowed us to apply for emergency Covid-19 funding to help residents with a wide variety of needs as indicated in the table on the next page.
Frontline staff were encouraged to make applications on behalf of residents who had been impacted by Covid-19 and a tracking system was established to record and monitor our spend. Over the course of five months, we supported 175 households in accessing essential funds, providing many of them with a lifeline. Total funding secured for our residents was £182,905.
Total funding secured for our residents was
## **£182,905**
**46 Southern Housing Group**
## **Households supported by item**
**----- Start of picture text -----**
180
150
120
90
60
30
0
Food Council Tax Digital Utilities Travel Toys/activities TV Licence Phone/Wifi Other
**----- End of picture text -----**
## **Community centres and the impact of Covid-19**
Lockdown restrictions resulted in most of the Group’s community centres being closed down, and almost all community centre activity being suspended.
A number of our centres were used as food distribution points during the crisis.
One centre which hosts a nursery in Hackney remained open to support a number of children with special needs.
Centres are now slowly starting to open to a wider range of activities and will continue to do so as lockdown eases over the coming months. All necessary safety measures and precautions are being taken to ensure the safety of residents, the public, contractors and Group colleagues.
We will be conducting a review of our centres over the coming months and creating a strategy to direct the future development of our community assets.
Annual Report and Group Financial Statements 2020-21 **47**
**Corporate Plan 2020-23** (continued)
## **Focus on: Fighting food poverty**
More than eight million people in the UK struggle to feed themselves and their families. This includes many working people and families with children, as well as some disabled people and people in later life.
Southern Housing Group has a strategy to help combat food poverty.
## **Food Pantry schemes**
Food pantries are subsidised food shops supported through partnership initiatives with our contractors and other housing associations. Customers of the Group who fulfil the required criteria can apply for membership of the Pantry for a nominal cost per week, which allows them to fill their shopping baskets with donated, or vastly reduced priced, foodstuffs.
Last year, we set up the Ixworth Food Pantry in South Kensington in partnership with the St Giles Trust to tackle food poverty by giving vulnerable residents access to groceries for a nominal fee.
This year there has been an increased number of families living on reduced incomes. In response to this, the Group has stepped up to open further food pantries in partnership with our contractors – for example in Dover.
Rajvinder Kaur, Employment Skills and Development Officer said, “Social Value gifted [by our partners] makes all the difference and can save the Group valuable resources while improving the wellbeing of our residents and the wider community.”
Bill Watts, Construction Director at Amber said, “We are delighted to complete the works in Dover, and we are looking forward to assisting in the Reading area once a location can be found… I truly feel this initiative will really make a difference and we thank the Group for the opportunity to play our part.”
## **Supporting food banks**
The pandemic has seen a dramatic increase in demand for foodbank services across the country, as many people’s incomes have fallen during the crisis. Supporting community foodbanks is part of our wider food poverty strategy.
We provide food vouchers which can be redeemed at most major supermarkets through our hardship fund, enabling more residents to gain access to fresh produce not typically available at food banks.
A great example of our work supporting food banks involves Tower Hamlets’ biggest foodbank, First Love Foundation. In recognition of the valuable service they provide across the local community, we donated £5,000 to the Foundation this year.
Keeping up with demand has been a challenge for First Love Foundation, which reported a 900% increase in people turning to its summer service during the pandemic. Tower Hamlets has the highest rate of child poverty in London with a staggering 44% of children living in inadequate conditions and without access to nutritious food. The foodbank’s Love Summer Foundation scheme helped struggling parents throughout the holidays, providing a variety of advice, food, workshops and parental support.
First Love Foundation CEO and Co-Founder Denise Bentley said, “Our ‘Love Summer 2020’ campaign has been critical for children in the borough who live in poverty. Covid-19 has increased demand for our services, as children are unable to attend summer camps and parents struggle with increased economic pressure. The support from Southern Housing Group has been instrumental in ensuring we can continue to support children in the borough and make sure not only no child goes hungry, but that each family is fully and properly supported.”
Over in Newham, the Group donated £5,000 towards Newham Food bank, in recognition of the valuable service they provide across the local community.
The Mayor of Newham, Rokhsana Fiaz OBE, said, “As many are aware, Newham has one of the highest rates of child poverty in London and a high rate of households in temporary accommodation. Organisations such as Newham Foodbank already provided an invaluable service for our community but have gone above and beyond during this time of crisis. Southern Housing Group’s support will be a huge help in our fight against food poverty and our commitment to supporting families in the Newham community during Covid-19.”
Anabel Palmer, Director of Community Investment and Care at Southern Housing Group, added, “Although foodbanks shouldn’t be needed, we recognise the vital role they have played in our communities during these challenging times.”
**Southern Housing Group**
**48**
## **Focus on: Supporting community education**
Tutors United is a small charity providing free English and Maths tuition to children in Primary school, Years 4, 5 and 6. They partner mainly with housing associations and provide small weekly classes on their estates. We started working with them several years ago on two estates. Feedback from parents has been very positive with children markedly improving in literacy and numeracy. We have since expanded the provision to five classes, four linked to estates and one virtual class which can take Southern Housing Group residents from anywhere in the Group.
At the start of lockdown the physical classes all moved online without a hitch, and we are currently in conversation with Tutors United about how and where to continue this model as lockdown eases, as it offers the opportunity for more universal provision across the Group.
## **Measuring outcomes – one student’s story**
In initial assessments, Anna*, received a grade of 3S in English, which was three years below where a Year 6 pupil should have been.
After support from Tutors United, Anna’s maths’ assessment score increased to 71%, just four percentage points away from being above average in the age group.
In English, Anna improved from the initial result by one whole year standard, achieving a 4S in midpoint grading.
* name changed.
**Focus on: Charity fundraising 2020-21**
Colleagues across the Group raised
**£34,000** for the Group’s chosen charities this year: – The Foodbank, Isle of Wight – Momentum Children’s Charity – covering Sussex and London – Air Ambulance Service for Kent, Sussex and Surrey – Turning Tides – Sussex charity for the homeless.
Annual Report and Group Financial Statements 2020-21 **49**
**Corporate Plan 2020-23** (continued)
## **People**
## **Our objectives**
- Be a place where colleagues are proud to work
- Be a supportive, inclusive, diverse and equal opportunity employer
- Create a high-performing culture that supports our people to grow.
## **Our commitments**
- Increase our investment in staff training and development over the next three years
- Increase our employee engagement score year-on-year
- Increase the percentage of colleagues saying they are proud to work for the Group
- Reduce and eliminate any pay gaps among our diversity strands
- Ensure our workforce reflects the diversity of the communities we serve
- Continue to support the health, safety and wellbeing of our staff and reduce health and safety incidents.
## **Our progress during 2020-21**
Although this has been a year like no other, we have kept on track with our People Strategy.
Following lockdown in March 2020, we were able to adapt quickly and equip all our office-based colleagues (around half of all colleagues) to continue working in a fully agile way – mostly from home.
## **Equality, Diversity and Inclusion**
We have refreshed our Equality, Diversity and Inclusion strategy and agreed a series of actions over the next three years.
Our network groups have grown and developed and provide support, information and guidance to colleagues across the BAME, Age, LGBTQ+, Parents and Carers, Women and Disability strands.
Strengthened by the Black Lives Matter agenda, we have focused on leadership development for BAME colleagues. Working with other G15 organisations, we have created a specific leadership development programme for BAME colleagues. The G15 ‘Accelerate’ initiative was launched in July 2020, with four Group colleagues taking part.
We continue to work with Future of London on their Emerging Talent programme. We also supported the Leadership NOW programme developed by UNIFY (the combined groups of the G15 BAME networks), which launched at the end of November and is supported by our BAME network chair.
## **Learning and development**
We provide a comprehensive range of training and development initiatives and, this year, we launched the first step of our new performance and talent management approach. This will improve how we set expectations and objectives, explore development and individual aspirations, check in on wellbeing and formalise feedback on an annual basis.
## **Best Companies survey**
We launched our Best Companies pulse survey in September which provided a good indication of how we are tackling the key issues that matter to colleagues across the Group.
## **Key results:**
- 75% engagement (812 individuals) – target 72%
- Employee engagement score increased to 671 – we are a one-star company
- Increased scores in Leadership, My Manager, My Company, Wellbeing, Fair Deal and Giving Something Back
- Decreased scores in Personal Growth and My Team – the reasons for this are being explored in more detail with individual teams
- Fair pay: more than 95% of colleagues agreed they are paid fairly for the work they do relative to people in similar positions in similar organisations, and that they feel they receive fair pay for the responsibilities they have in their jobs. This improvement on the previous survey can be attributed to the implementation of the salary benchmarking review that took place this year.
## **Gender pay gap**
We have continued to reduce our gender pay gap year-on-year to 15.2% in April 2020 (from 18.1% in April 2017).
## **Wellbeing**
The individual wellbeing of our colleagues is a key priority for the Group.
- How we support colleagues:
- Providing specific support for mental health issues (tackling stress and isolation)
- Offering sources of advice and guidance through our employee assistance programme, mental health first aiders, help from line managers or from HR colleagues
- Launched ‘Wellbeing Wednesdays’
- Mental health awareness training (RESPOND) for all.
## **Reward and recognition**
Throughout the year, we have recognised the achievements of colleagues across the Group and how they have gone the extra mile in spite of difficult circumstances.
## This includes:
- Making corporate thank you payments to our frontline colleagues
- Individual ‘All in A Day’s Work’ accolades awarded by the Chief Executive
- Holding our second annual OSCARS (Outstanding Southern Colleagues Achievement and Recognition Scheme) ceremony virtually in December and celebrating the successes of teams across the Group
- Reviewing our benefits offer.
## **Our priorities for the year ahead**
Key areas of focus will include:
- The development of our talent management approach
- Encouraging our new hybrid agile way of working in a post-Covid environment
- Continue to manage the Group’s employer brand and public profile through our recruitment strategy to attract new and diverse talent
- Develop our Equality, Diversity and Inclusion action plan
- Work to deliver the targets in place to double BAME representation at leadership and Board level as part of our commitment to our Leadership 2025 pledge.
Individual wellbeing remains firmly on our radar and we will continue to support our colleagues in this area as well as reduce any health and safety incidents.
**50 Southern Housing Group**
## **Focus on:**
**Supporting careers** Apprenticeships
Chelsea has been with the Group since May 2017 in her role as a Support Worker. She wanted to advance her skills and achieve a recognised qualification, so with the support of her manager, she applied to join the Group’s apprentice scheme, which is part funded by the government’s Apprenticeship Levy, and with contributions from the Group.
Her hard work paid off and Chelsea now has a Level 3 Diploma in Health and Social Care.
Other apprenticeships on offer range from housing and property management, business administration, care leadership, accountancy, plumbing and more. Currently, there are 28 Group employees on the apprenticeship programme.
Chelsea said, “Overall my apprenticeship was very good. I had lots of support throughout the whole experience from my team leaders Debbie Daniels, Support Team Leader, and Emma Venables-Smith, Wellbeing Manager, and from HTP Apprenticeship College on the Isle of Wight. I really would recommend doing an apprenticeship to other colleagues. It has helped me have more of an understanding of the different needs of our customers, from those with physical health problems and/or mental health needs. I also feel more confident in my role and it may help me make a career change within the Group in the future.”
Nicky Marsh, Apprenticeship and Qualifications Co-ordinator said, “The aim is for all apprentices to be offered a permanent position within the Group on completion of their apprenticeship if they’re not in a role already. Hopefully, the apprenticeship role is just the start of someone’s successful career journey with us.”
Annual Report and Group Financial Statements 2020-21 **51**
## **Financial review**
## **Resources**
## **Our objectives**
- Remain financially stable and well-governed
- Create financial capacity and use it to provide more homes
- Get fit for our digital future
- Provide value for money services to our customers.
## **Our commitments**
- Continue to generate and prioritise resources to reinvest in our social purpose
- Continue to generate a positive return on our assets
- Maintain the public funding streams supporting our development programme
- Improve how we use resources, reducing overheads per unit and monitoring our ‘value for money’ metrics
- Ensure that we prioritise digital investment to help us to deliver our objectives.
## **Our progress during 2020-21 Highlights**
Every penny of our surplus and more is reinvested in our existing homes and services as well as the provision of new homes, and we continue to use our capacity to meet growing housing needs. This year £87m was invested in the delivery of new-build homes and we invested a further £42m in enhancing the safety and quality of our existing homes. Our top priority remains the health, safety and wellbeing of our residents and along with £14.5m spent during the year on building safety, we invested £1.5m in our communities.
This level of investment is supported by the consistent generation of surpluses, grant receipts from our strategic partnerships with Homes England and the Greater London Authority and careful treasury management, which included the issuance of £100m of retained bonds in May 2019.
||
of retained bonds in May 2019.|||
|---|---|---|---|
|||**2020-21**
**£m**|2019-20
£m|
||**Investment**
In existing homes
In new homes
In the business|**42**
**87**
**6**|30
260
5|
||**Funding**
Surplus for the year
Treasury management
Grant and other|**82**
**43**
**10**|23
236
36|
In April 2020 we welcomed Crown Simmons into the Group as a separate subsidiary, adding a further 625 units to our portfolio and generating a one-off accounting gain on acquisition of £58.8m. Crown Simmons operates in the Surrey area under its own Board and independent brand.
The year was dominated by the coronavirus pandemic and we mobilised quickly to support customers and colleagues. Our financial inclusion services ensured that customers had the support they needed to manage their finances during a very challenging time and more than 100 employees volunteered their free time to support customer wellbeing. This was a period of radical operational change and all our services, whether provided on the frontline or behind the scenes, had to be reengineered to ensure customer and colleague safety.
**----- Start of picture text -----**
The Mannings, Shoreham-by-Sea
**----- End of picture text -----**
**52 Southern Housing Group**
## **Group financial performance**
## **Turnover**
Turnover for the year totalled £212.2m, £24.7m lower than the prior year. Social housing lettings continue to constitute the majority of turnover from operations at 80% (2020: 69%) and income from lettings totalled £168.4m (2020: £162.9m). We took the decision to increase rents by CPI +1% with effect from 1 April 2020, in line with the provisions of the Rent Standard 2020-2025 published by the Regulator of Social Housing. Lettings income was further increased with the addition of 625 homes to our rented housing stock during the year following the merger with Crown Simmons.
While shared ownership sales were higher than last year at £18.9m (2020: £15.2m), open market sales were lower totalling £10.4m (2020: £47.3m). The fluctuations in these figures reflect year-on-year tenure variations in our development programme and 2020 saw a particularly high volume of market sale units from the completion of our Featherstone, London Lane, Dalmeny Avenue and Bow River Village Phase 2 schemes.
|Social housinglettings|**2020-21**
**80%**|2019-20
69%|2018-19
70%|2017-18
78%|2016-17
78%|
|---|---|---|---|---|---|
|Other social housingactivities|**12%**|9%|13%|16%|12%|
|Non-social housingactivities|**8%**|22%|17%|6%|10%|
## **Operating surplus**
|**Operating surplus**||||||
|---|---|---|---|---|---|
|**Group fnancialperformance**
Turnover
Cost of sales
Operatingcosts|**2020-21**
**£m**
**212.2**
**(25.6)**
**(148.3)**|2019-20
£m
Restated1
236.8
(47.3)
(145.5)|2018-19
£m
230.5
(39.3)
(129.3)|2017-18
£m
199.7
(29.3)
(121.3)|2016-17
£m
200.1
(24.2)
(111.3)|
|Surplus on disposal of fxed assets|**16.5**|24.1|9.7|11.1|13.6|
|Investmentpropertyvaluation|**6.2**|(5.9)|0.6|3.0|20.5|
|Operatingsurplus|**61.0**|62.2|72.2|63.3|98.8|
|Net fundingcosts|**(38.1)**|(38.4)|(32.8)|(22.0)|(31.9)|
|Gain on acquisition
Taxation andgift aid
Net surplus for theyear
Pension scheme movements
Total comprehensive income|**58.8**
**(0.1)**
**81.6**
**(4.5)**
**77.1**|–
(0.3)
23.5
0.2
23.7|–
(0.8)
38.6
(1.2)
37.4|–
3.6
44.9
6.1
51.0|–
(4.9)
62.0
(2.4)
59.6|
1 See Note 32 of the Financial Statements – Prior year adjustment.
The Group’s overall operating surplus was £61.0m compared with £62.2m in 2020 and the total operating margin increased from 26.3% to 28.8%. Overall operating costs are slightly higher than last year at £148.3m (2020: £145.5m). Increases attributable to the operating costs of the Group’s new Crown Simmons subsidiary, as well as the additional costs associated with our response to the coronavirus pandemic, were offset by efficiencies generated from our underlying operations.
We have continued our strategic approach to asset management in the year, rationalising our areas of operation to increase the efficiency with which we deliver services to our customers. A total of 257 units were sold to another registered provider, completing a phased transaction that began in 2020 and generating a surplus of £7.8m in 2020-21 to be reinvested in new and existing homes. Demand from our residents for an increased ownership share in their homes remained strong, with our surplus from staircasing receipts totalling £8.5m during the year (2020: £10.2m).
Last year, the impact of economic uncertainty caused by both Brexit and Covid-19 were felt in our investment property valuations which experienced a net reduction of £5.9m. These losses have been reversed this year as markets have stabilised and we have
recognised a valuation gain of £6.2m. Excluding the impact of investment property revaluations, our underlying operating margin was 25.9% (2020: 28.7%). This slight decrease is attributable to the larger programme of strategic asset disposal undertaken in 2019-20.
Net surplus for the year includes the impact of the one-off accounting gain on acquisition of Crown Simmons of £58.8m, driving an overall net margin of 38.5% (2020: 10.0%). Excluding this one-off gain, the surplus for the year is in line with the prior year at £22.8m (2020: £23.5m) with a net margin of 11.0%.
Total comprehensive income has been significantly impacted by the movement on pensions which this year shows a £4.5m actuarial loss compared with a small gain last year of £0.2m. This has been caused by the accounting deficit acquired in respect of Crown Simmons members and changes in the assumptions used for the Group’s existing defined benefit schemes, including a lower discount rate to reflect a significant reduction in yields on high-quality corporate bonds and an increase in long-term inflation expectations. These movements are partially offset by higher than expected asset returns.
Annual Report and Group Financial Statements 2020-21 **53**
**Financial review** (continued)
|||2019-20||||
|---|---|---|---|---|---|
||**2020-21**|£m|2018-19|2017-18|2016-17|
|**Surplus and margin by business line**|**£m**|Restated|£m|£m|£m|
|**Social housing lettings:**||||||
|Operating surplus|**30.2**|26.4|37.1|39.8|48.4|
|Margin|**18.0%**|16.2%|23.2%|25.6%|30.9%|
|**Other social housing activities:**||||||
|Operating surplus|**0.6**|0.9|3.6|3.0|7.4|
|Margin|**2.3%**|4.7%|12.3%|9.4%|34.0%|
|**Non-social housing activities:**||||||
|Operating surplus|**7.2**|19.5|21.2|6.3|8.8|
|Margin|**40.3%**|36.2%|51.9%|52.4%|40.4%|
Margins on social housing lettings have started to recover following successive years of reductions. Increased investment in building safety following the Grenfell fire and the cumulative impact of four years of government-mandated rent reductions had put significant downward pressure on our social housing lettings margins in recent years. In 2020-21, rents have been increased in line with the Rent Standard and have been favourably impacted by the growth in our social housing units following our merger with Crown Simmons. Social housing costs have increased slightly year-on-year to £138.2m (2020: £136.5m) reflecting the operating costs of the Crown Simmons units as well as additional expenditure from our response to the pandemic. Our Group-wide efficiencies programme has partially offset the impact of these increases and as a consequence margins have risen from 16.2% to 18.0%.
Other social housing margins have been negatively impacted by lower than expected sales of shared ownership arising from successive periods of national lockdown and tiered restrictions. Sales were also delayed while we obtained additional building safety certification to facilitate completions at some of our sites.
The fixed costs of supporting shared ownership sales, when attributed to lower turnover, have resulted in a small loss of 4.5% on first tranche shared ownership sales against a surplus of 8.8% last year. All the necessary building safety certification is now in place to satisfy mortgage lender requirements and sales are underway.
Margins on non-social housing remain strong, supported by consistent year-on-year performance in our commercial and private rent lettings and margins in excess of 40% on open market sales.
## **Group financial position**
Net assets have increased by £77.0m to £711.5m during the year, further enhancing the Group’s historically strong financial position. Long-term borrowing has marginally increased to £1,712.5m from £1,700.0m but gearing remains low relative to our peers at 40.7% (2020: 40.4%). The increase in financing has funded the development of 93 new homes during the year (2020: 419) and we are targeting the delivery of 199 more in 2021-22.
|||2019-20||||
|---|---|---|---|---|---|
|**Group fnancialposition**|**2020-21**
**£m**|£m
Restated1|2018-19
£m|2017-18
£m|2016-17
£m|
|**Non-current assets**||||||
|Property,plant and equipment|**2,214.6**|2,102.7|1,975.9|1,873.9|1,809.3|
|Investmentproperties|**162.1**|143.3|106.9|108.9|78.8|
|Other investments|**19.1**|19.0|19.2|24.3|22.2|
|Net current assets|**49.6**|81.5|92.2|31.7|130.0|
|Total assets less current liabilities|**2,445.4**|2,346.5|2,194.3|2,038.9|2,040.3|
|Long-term creditors|**(1,712.5)**|(1,700.0)|(1,564.4)|(1,445.6)|(1,496.4)|
|Deferred tax|**(0.7)**|–|–|–|–|
|Provisions|**(7.5)**|(3.5)|–|(1.4)|(0.2)|
|Pensions|**(13.2)**|(8.5)|(9.3)|(8.7)|(9.9)|
|Total net assets|**711.5**|634.5|620.6|583.1|533.8|
|Total reserves|**711.5**|634.5|620.5|583.1|533.8|
1 See Note 32 of the Financial Statements – Prior year adjustment.
Assets held for sale totalled £14.9m at the end of the year (2020: £22.1m) representing five unsold units for open market sale and 69 unsold shared ownership units. Of these, one open market and 37 shared ownership sales have subsequently completed. EWS1 forms have been obtained where required and sales are progressing.
**54 Southern Housing Group**
## **Treasury and capital structure**
The Group maintains a treasury management policy, the principal purpose of which is to monitor and control the cost and risk associated with our treasury management activities. This policy is an important element of our governance framework and prescribes our approach to the management and mitigation of liquidity risk, interest rate risk, credit and counterparty risk and any refinancing risk arising from the maturity profile of our debt portfolio. Compliance with loan covenants is regularly monitored by the Board. We have remained compliant with all our covenants during the year, and are forecasting continued compliance over the life of our long-term financial plan (a period of 30 years).
We draw our funding from a range of different sources to provide a diversified funding structure. Total facilities as at 31 March 2021 were £1.4bn, comprising a mix of loan facilities and bond finance. Of these facilities, £401.9m remained undrawn at the financial year-end, comprising revolving credit facilities capable of draw down within 72 hours. Refinancing risk is actively managed and at 31 March 2021 we had £620.4m (45%) of our loan portfolio expiring in the next five years, of which £480.7m relates to revolving credit facilities. We anticipate these facilities will be rolled forward as they fall due.
Cash balances totalled £35.7m at 31 March 2021 including £11.1m of ring-fenced cash deposits and balances. The treasury management policy requires us to maintain sufficient cash and committed loan facilities capable of immediate draw down to cover the next 18 months’ committed cash flows, excluding any forecast sales income. At the financial year-end we had forward cover for these commitments significantly in excess of policy requirements.
With the exception of local authority loans totalling £36m which are unsecured, all remaining facilities are fully secured on the Group’s housing properties. In accordance with the annually approved treasury strategy, we actively manage levels of property security to optimise the use of the Group’s assets in supporting our funding requirements. At the year-end, the Group had more than 9,000 unencumbered properties available as security.
Of £985.0m drawn debt at year-end, 81.1% was at fixed rates of interest and 18.9% at variable rates, well within the requirements of the treasury management policy. The weighted average cost of funds as at 31 March 2021 was 4.04%. The Group has no stand-alone derivatives or exchange rate exposure.
Our primary objective in relation to investments is the security of capital and this is prioritised over returns. The treasury management policy outlines the requirements relating to the long-term credit rating of any counterparty together with limits on the value of the sums invested.
The Group maintained its A3 credit rating with Moody’s during the year.
## **Funding mix (drawn debt)**
Aggregated bond **15.98%** Bond **43.15%** Local Authority **3.65%**
Term loan (bank) **26.69%** Term loan (building society) **2.54%** RCF (bank) **7.99%**
## **Interest rate mix**
|Variable|Fixed|
|---|---|
|**£185.79m**
**18.86%**|**81.14%**
**£799.21m**|
## **Summary of the Group’s liquidity**
||Cash in bank
**£24.60m**|**£401.92m**
Undrawn bank facilities
Total|
|---|---|---|
|||**£426.52m**|
||||
## **Group’s liquidity management**
|Forecast headroom against|Undrawn facilities and|
|---|---|
|the Group’s liquidity policy|cash investments|
||**£426.52m**|
|**£97.77m**||
Annual Report and Group Financial Statements 2020-21 **55**
**Financial review** (continued)
**----- Start of picture text -----**
Baden Powell Close, Dagenham, Barking & Dagenham
**----- End of picture text -----**
## **Facility maturity**
Within one year **£33.21m** 2-5 years 6-10 years **£120.31m** 10-20 years **£331.07m** >20 years **£315.05m**
**£587.27m**
Average cost of funds
## **4.04%**
## **Outlook**
The social housing sector faces significant challenges in the coming years, not just from the costs to remediate fire safety issues but from reaching the government’s net zero carbon emissions target by 2050. The precise costs of the latter are unknown at present but are likely to far exceed the building safety expenditure seen in the sector in recent years. In common with many of our developer peers, we are examining our future appetite for development growth in light of these emerging challenges.
Our improving operating performance will enable us to access significant untapped capacity to fund our growth and investment programmes. Coupled with our large balance sheet, high levels of liquidity and low levels of borrowing relative to our asset values, we are well-positioned to meet the current and future sector challenges with a business plan that is highly resilient to both acute and prolonged periods of stress.
Available facilities (million)
## **£401.92**
**56 Southern Housing Group**
## **Value for money**
We are committed to driving value for money in all our activities. That means maintaining our strategy to increase investment in new and existing homes and optimising the returns generated from all areas of our operations.
Value for money is explicitly embedded in our decision-making processes and we don’t just measure our success by the cost of delivering services but by their outcome for our customers. Rather than maintaining a separate value for money strategy we embed value for money objectives in all our core business strategies which together support the delivery of our overall corporate plan.
## Homes Customers
## Communities
- Ensure all our residents have a decent, safe home.
- Listen to our customers, • Invest more in creating developing trusted relationships. sustainable estates and neighbourhoods that people
- • Be easy to do business with. are proud to live in.
- Be easy to do business with.
- Invest more in maintaining and modernising our homes.
- Improve the lives of our residents and their communities.
- Excel at customer service.
- Provide more homes in the areas we work.
- Provide excellent care and support services to people that • Work with our local partners need them. to improve our residents’ communities.
- Ensure our homes are sustainable, affordable and energy efficient.
## Peopleplele
- Peopleplele Resources • Be a place where colleagues are • Remain financially stable and proud to work. well-governed.
- • Be a supportive, inclusive, diverse • Create financial capacity and use and equal opportunity employer. it to provide more homes.
- Create a high-performing culture • Get fit for our digital future. that supports our people to grow. • Provide value for money services to our customers.
Annual Report and Group Financial Statements 2020-21 **57**
**Value for money** (continued)
## **Homes**
Maintaining and improving the safety of our homes and our residents remains our top priority. Our Customer Safety Committee oversees delivery against the Group’s customer health and safety compliance obligations, including related asset management, and reports regularly to the Board.
We have used our surpluses to make significant investments in building safety during the year, spending more than £14.5m on building safety measures including surveys, inspections and remediation works over and above our standard compliance activities.
We remain committed to delivering the highest standards of building safety compliance. Gas servicing was 100% compliant at the year-end for the third consecutive year. This demonstrates the efficiency and effectiveness of our processes across multiple business areas including customer safety, housing management and estate care. Electrical certificates for communal areas were in place for 100% of our affected properties (2020: 99%). In 2019, we began a five-year programme to ensure that in-dwelling electrical certificates are in place across our homes and at the year-end 42% of this programme had been completed against a target of 40%.
We remain up to date with type 1 Fire Risk Assessments (FRA) and continue to work closely with our Primary Fire Authority (Hampshire Fire and Rescue Service). We have engaged a range of appropriately qualified consultants to support activity across our building safety programmes to complement our in-house Building Safety Team. All activity is overseen and monitored by the Customer Safety Committee and the Board.
These results are set against the backdrop of a year which saw multiple national lockdowns that limited access to our customers’ homes and necessitated significant changes in our operational processes. We are pleased to have maintained the highest standards of compliance during a very challenging year.
Our corporate plan is explicit in its aim to provide homes of all tenure types to ensure that we meet a wide range of housing needs. During the year, we completed 93 new homes against a target of 116 and began work on 139 more across a wide range of tenure types including social and affordable rent, shared ownership and open market sale units, together with units
for private rent. Our overall tenure mix is detailed on page 29. Delivery slowed in the first national lockdown leading to a slight reduction in handovers compared with our target for the year.
We will continue to deliver a balanced programme using the cross-subsidy model from market-facing products to keep our social and affordable rents as low as possible. Our investment appraisal process ensures that schemes are designed to address local needs and options are subject to rigorous financial assessment against Board-approved internal thresholds, set within a governance framework that includes the Group’s development committee and Board.
Value for money is a key component of our Development Strategy. We look to drive procurement efficiencies from our contractor and consultant frameworks, grow our in-house technical and commercial expertise and deliver homes to a higher construction standard with fewer defects. In addition, we recognise the strategic importance of opportunities that exist with properties and land we already own. Our Hidden Homes programme which started in 2017 is on track to deliver an additional 190 plots with an approximate land value of £13.7m.
Our in-house construction arm, Southern Housing Construction Limited, delivers construction services to the Group on smaller sites where cost-effective build services are harder to source. It is currently on site at two schemes, building a total of 73 new homes for affordable rent, shared ownership and open market sale.
Our Growth Strategy focuses on the consolidation of new homes, either constructed or acquired, within existing management areas to maximise the benefit of our established infrastructure and reduce our management cost per unit. A key element of this strategy is the rationalisation of our stock in areas where we don’t have the presence to deliver the most cost-effective services to our customers. During the year, we sold 257 properties in non-strategic areas for the Group to another registered provider, generating a surplus of £7.8m to be reinvested in new and existing homes and services.
At year-end, approximately 70% of the Group’s stock was rated at Energy Performance Certificate (EPC) standard ‘C’ or above and our long-term financial plan includes the investment necessary to bring all of the Group’s rented homes to a minimum EPC ‘C’ rating by 2030 in line with the government’s deadline.
||||2020-21|2021-22|2022-23|2023-24|
|---|---|---|---|---|---|---|
|**Measure**|**2020-21**|2019-20|target|target|target|target|
|Gas servicing|**100%**|100%|100%|100%|100%|100%|
|Communal electrical safety|**100%**|99%|100%|100%|100%|100%|
|In-dwellingelectricalprogramme|**42%**|28%|40%|60%|80%|100%|
|Overdue FRA1inspections|**15**|n/a|0|0|0|0|
|Overdue FRA P02actions|**0**|n/a|0|0|0|0|
|Overdue FRA P13actions|**175**|n/a|100|100|100|100|
|Overdue NOD4actions|**3**|n/a|0|0|0|0|
|New homes delivered|**93**|419|116|199|788|614|
1 Fire risk assessment: Type 1 Fire Risk Assessment (FRA) is a non-intrusive survey. It assesses all the common parts of a building, such as the lobby area in a shared block of flats, but not individual dwellings.
2 Priority 0: Action that poses an urgent risk to residents. Actions should be completed within 24 hours.
3 Priority 1: Action that poses a high risk to residents. Actions should be completed within a 30-day timeframe. Of the 175 actions identified at year-end, 127 remain outstanding. Every P1 action is tracked and monitored on a weekly basis by the Building Safety Team who ensure progress is made and the appropriate interim mitigations are in place.
4 Notice of deficiency: identifies provisions and/or procedures which the Fire Authority considers as either lacking or not suitable and sufficient regarding the building. Work to close the three outstanding NODs is well advanced and progress is overseen by the Customer Safety Committee.
5 Outstanding FRA inspection completed on 1 April 2020. n/a = new Board KPI for 2020-21.
**58 Southern Housing Group**
## **Customers**
We are committed to listening to our customers and using their insight to improve our services. Our resident involvement strategy is centred on customer engagement to improve our understanding of customer needs and the quality of our service. Our Resident Scrutiny Group has a direct line to the Board and works in conjunction with the resident steering group to shape our services. During the year, these two groups have carried out a deep dive into our complaints processes to ensure that our implementation of the new Housing Ombudsman’s Complaint Handling Code supports customers and provides them with the speediest redress. We have also co-produced a model that enables our Resident Scrutiny Group to oversee our learning from complaints, effectively holding the organisation to account.
Satisfaction with overall levels of service provided by the Group closed the previous year at 83%. The new financial year began a week into the first national lockdown and most of the year was spent under some form of tiered restriction or full lockdown. Emergency repair work and safety requirements such as gas servicing continued throughout but the prolonged periods of lockdown impacted significantly on our ability to access residents’ homes and carry out non-emergency repairs. By the end of the year these delays had contributed to a fall in overall satisfaction levels to 74%, although it should be noted that this figure resulted from a limited number of surveys carried out in the last quarter of the year as survey activity was also suspended during the periods of lockdown. We are working collaboratively with our day-to-day repairs contractors to reduce the backlog of non-emergency repair work and have agreed targets and timescales in place.
Similarly, we have seen a material increase in the number of complaints during the year. Through the early months of 2020-21 complaint volumes remained low, with customers exhibiting patience and forbearance as we sought to provide services under the new restrictions. From the third quarter, however, volumes began to pick up. From quarter four, the new transparency and offer of choice being given to customers for making a formal or informal complaint (in accordance with the Housing Ombudsman
Service’s Complaint Handling Code) contributed further to increased case volumes, as did the government’s ‘Make Things Right’ campaign. Feedback from complaints indicates that customers are continuing to feel anxiety or frustration as a result of the ongoing pandemic and have found it harder to receive or access Group services over the past 12 months.
It is important to us that we make sure our empty homes are turned around quickly so they can be re-let to a new resident or family as soon as possible. This year has seen our average void turnaround time increase from an all-time low of 16 days in 2019-20 to 29 days at the end of 2020-21. We suspended letting activity in March 2020 in line with government guidance and resumed in June using a risk-based framework that prioritised the backlog of homes that had built up over the period.
Ongoing coronavirus restrictions continued to impact lettings for the rest of the year, despite the digitisation of processes adopted during the period. By the end of March 2021, the number of unlet homes had reduced to 131, broadly in line with pre-pandemic volumes, and we are now well placed to deliver much reduced turnaround times for the coming year.
The pandemic also affected levels of rent arrears which increased from 3.97% last year to 4.65%. The work of our financial inclusion teams has been instrumental in limiting the impact to our customers and in minimising the increase in overall Group arrears. The increased target for 2021-22 reflects the likely impact of higher unemployment figures and a reduction in government support via the furlough scheme.
93% of emergency repairs were completed within 24 hours against a target of 85%.
Our Corporate Plan commits to providing excellent care and support services to those who need them. Overall customer satisfaction levels with these services were 99% (2020: 93%) and all of our registered care services were rated as ‘outstanding’ or ‘good’ by the Care Quality Commission (CQC).
||||2020-21|2021-22|2022-23|2023-24|
|---|---|---|---|---|---|---|
|**Measure**|**2020-21**|2019-20|target|target|target|target|
|Overall customer satisfaction|**74%**|83%|85%|85%|85%|85%|
|Void turnaround time (days)|**29**|16|17|16|15|15|
|Arrears
Emergencyrepairs completed within 24 hours
Complaints response within 10 workingdays2
Cases where HOS1fnds maladministration|**4.65%**
**93%**
**n/a**
**63**|3.97%
93%
n/a
n/a|4.00%
85%
n/a
0|4.50%
86%
100%
0|4.00%
87%
100%
0|4.00%
88%
100%
0|
1 Housing Ombudsman Service.
2 New Board KPI for 2021-22.
3 30 HOS determinations were received regarding complaints. Of these, six included maladministration. A further 12 were adjudged to include service failure which under the new HOS Complaint Handling Code would be reported as minor maladministration. n/a = new Board KPI for 2020-21.
Annual Report and Group Financial Statements 2020-21 **59**
**Value for money** (continued)
## **Communities**
We remain committed to improving the lives of our residents and their communities and this work took on extra significance during the year as we mobilised to help our customers manage the impact of the coronavirus pandemic.
During the year, we invested £1.5m (2020: £1.1m) in community activities to help people sustain their tenancies and improve their own and their communities’ quality of life. Our financial inclusion service responded to 3,763 enquiries and gave full support to 1,578 residents with advice on topics including transition to Universal Credit and navigating the complexities of the wider welfare benefits system. Our work enabled residents to benefit from a total of £5.25m in additional resources including the recovery of outstanding housing benefit. We also supported 240 residents (2020: 217) with employment and skills advice.
In addition, more than 100 colleagues from across the Group volunteered their time during the pandemic to make calls to vulnerable residents to alleviate loneliness and ensure that they were signposted to the right local support services where necessary. They also ensured that those impacted had access to food and other basic supplies. Through our partnership work we accessed £0.14m from Family Action to support residents impacted by hardship as a result of the pandemic.
We continued our work to tackle food poverty, prioritising support for food pantries including Dover and Ixworth Place, supplying food and basic necessities to many of our residents. We also supported a range of young people’s projects including Tutors Unite which provides intensive catch-up learning, and Prospex Youth Support which engages with young people in some of our inner city, high-density neighbourhoods while reducing anti-social behaviour and its impact locally.
## **People**
We are very proud of our culture across the Group and see lived experience of our values every day.
We are rated as one of the top 100 not-for-profit companies to work for in the UK according to Best Companies, entering the list at 83 out of 100 in our first year of participating in the survey (2019-20). In September 2020, we carried out a further pulse survey through Best Companies to check in with colleagues and gauge how they were feeling after a difficult and turbulent start to the year because of the pandemic. We were pleased to find that both participation and engagement levels had in fact increased compared with the prior year, with participation higher than the Board’s target at 75% (2020: 67%; target 72%).
We invested £0.7m in responding to the pandemic, providing the necessary technology and office equipment to support homeworking for every member of non-frontline staff, making our offices Covid-secure and providing the proper levels of PPE to all affected staff. Our business continuity plans proved to be robust and we are very proud of our staff who provided uninterrupted services in spite of the challenges of lockdown, social distancing, increased sickness levels and high levels of customer demand.
||||2020-21|2021-22|2022-23|2023-24|
|---|---|---|---|---|---|---|
|**Measure**|**2020-21**|2019-20|target|target|target|target|
|% of staffparticipatingin engagement survey|**75%**|67%|72%|75%|75%|75%|
|Best Companies Index (BCI) score|**671**|662|–|–|–|–|
## **Resources**
Our Corporate Plan outlines our priorities for our homes, customers, communities, people and resources over the next three years. Value for money principles are embedded in each of these areas and the plan is explicit in its objective to improve how we use our resources to provide value for money services to our customers.
During the year, the Board received regular reporting on the Group’s performance against its key performance indicators and these include the seven value for money metrics published by the Regulator of Social Housing. The table on the next page shows our performance against these regulatory measures compared with our sector peer group, the G15, which represents the largest London-based social landlords.
The table also shows our performance against the social housing lettings interest cover metric used by our credit rating agency, Moody’s. This is a key measure for the Group and expresses the extent to which our interest bill is covered by the lowest risk part of our business.
Our loan covenants contain a different definition to both the Moody’s and Regulator metrics, and we track our performance relative to our loan covenants on a fortnightly basis. We maintained significant headroom against our loan covenants during the year and are projected to do so for the duration of our long-term financial plan (a period of 30 years).
**60 Southern Housing Group**
|**Measure**
Reinvestment|**2020-21**
**5.8%**|2019-20
12.9%|2020-21
target
9.5%|2021-22
target
10.2%|2022-23
target
12.9%|2023-24
target
9.2%|G15 median
2019-20
5.1%|
|---|---|---|---|---|---|---|---|
|New supply(social)|**1.4%**|1.2%|0.3%|0.4%|4.8%|3.9%|1.5%|
|New supply(non-social)|**0.0%**|1.0%|0.0%|0.2%|0.2%|0.4%|0.8%|
|Gearing|**40.7%**|40.4%|42.7%|43.2%|44.8%|44.9%|46.1%|
|EBITDA MRI|**38.7%**|61.2%|25.5%|85.7%|121.3%|131.1%|107.2%|
|Social housingcostper unit|**£5,759**|£5,620|£6,130|£5,750|£5,430|£5,080|£4,995|
|Operating margin||||||||
|(social housing)
Operatingmargin (overall)
Return on capital employed
Social housing lettings
interest cover|**18.0%**
**21.0%**
**2.5%**
**65.1%**|16.2%
16.1%1
2.6%
57.9%|11.0%
14.2%
2.1%
46.2%|16.0%
21.5%
2.3%
67.6%|21.7%
23.1%
3.1%
84.0%|28.3%
25.3%
3.1%
104.9%|27.2%
21.7%
2.6%
–|
1 Restated to exclude surplus on disposal of fixed assets.
The Board set a minimum target of £3.4m of efficiency savings in 2020-21. This target was exceeded and operating margins in social housing lettings and overall have increased compared with the prior year, significantly outperforming forecast expectations. We have a comprehensive efficiencies programme in place for the next three years that is focused on the continual strengthening of our operating performance while driving improved outcomes for our customers.
The latter is supported by our commitment to user-led service design and customer engagement has been key in the development of our digital offer via our Repairs Online service. By the year-end customers could raise, schedule and track a repair online 24 hours a day, seven days a week from any device. In early May 2021, we launched our new Customer Portal enabling customers to log in from any device at any time to view their accounts and access our new payment platform seamlessly with a single sign-on. Ongoing investment in our digital services will drive further enhancements to the portal during 2021-22.
Social housing cost per unit is higher than the G15 median and increased compared with last year as levels of overall investment
in our existing stock increased. Capitalised major repairs were £42.6m compared with £30.0m in 2019-20. We expect cost per unit to decrease over the next three years as reduced management costs are a central focus of our efficiencies programme.
EBITDA MRI was also impacted by this higher level of stock investment and by a reduction in sales income in the year, the product of year-on-year tenure variations in the development programme.
We continue to maintain gearing well below our peer average, reflecting the size and strength of our balance sheet, and the achievement of our efficiencies target in 2020-21 has created a strong platform for the realisation of our longer-term programme. EBITDA MRI and social housing lettings interest cover are projected to rise consistently and sustainably over the next three years and for the duration of our long-term financial plan as operational efficiencies are embedded. Target efficiency savings for the coming year are embedded in Group budgets with performance tracked on a monthly basis and overseen by the Finance Committee and the Board.
## **VFM metric definitions**
|**VFM metric defnitions**||
|---|---|
|Reinvestment %
New supply (social) %
New supply (non-social) %|Investment in properties (existing stock as well as new supply) as a percentage of the value
of totalproperties held
The number of social housing units that have been acquired or developed in the year
as aproportion of total social housingunits owned
The number of new non-social housing units that have been acquired or developed in the year|
||as aproportion of total social and non-social housingunits owned|
|Gearing%|The amount of debt held over the value of housingassets|
|EBITDA MRI %|Earnings Before Interest, Tax, Depreciation, Amortisation (Major Repairs Included).|
||Indicates the level of surplusgenerated compared to interestpayable|
|Social housing cost per unit|Sum of social housing operating expenditure divided by the total number of units under|
||management. It includes management costs, service charge costs, routine maintenance costs,|
||planned maintenance costs, major repairs expenditure, capitalised major repairs expenditure,|
||lease costs and other social housinglettings costs|
|Operatingmargin (social housing) %|Operatingsurplus from social housinglettings divided byturnover from social housinglettings|
|Operating margin (overall) %|Surplus from all operating assets before exceptional items are taken into account.
Calculation excludesgain/(loss) on disposal of fxed assets|
|Return on capital employed|Operatingsurplus as apercentage of total assets less current liabilities|
|Social housinglettings interest cover|Operatingsurplus from social housingcompared to net interestpayable|
Annual Report and Group Financial Statements 2020-21 **61**
**Risk management**
Effective risk management is at the heart of our business and has an important part to play in ensuring we are able to deliver our purpose. Our Board and the Audit and Risk Committee (ARC) play key roles in our management of risk across the Group.
The Board has overall responsibility for ensuring the Group has an appropriate strategy and systems for managing risk, assesses our emerging and principal risks and sets our risk appetite and strategy for managing risks. The ARC supports the Board in undertaking detailed consideration of risk management systems and monitoring and gives the Board assurance that they are fit for purpose. The Board uses this opinion from the ARC as part of its assurance on the effectiveness of risk management arrangements.
During the year, we began a review of our risk and assurance framework. We did this as part of our strengthening of governance and control arrangements in response to the Regulator’s in-depth assessment. The Board will be considering a revised risk and assurance framework in October 2021 following focused consideration by the ARC in September.
As a first step to renewing our approach, the Board has reviewed our risk appetite and our key strategic risks. The first step was to assess risk appetite in an externally facilitated workshop using four categories of risk:
## **1. Minimal**
As little as reasonably possible. Preference for the ultra-safe option. Potentially limited reward. Avoiding risk is the key objective.
## **2. Cautious**
Preference for safe options with low inherent risk, even if this gives limited potential reward.
## **3. Open**
Willing to consider all potential options that also provide acceptable reward and Value for Money.
## **4. Seek**
Eager to be innovative, choosing options offering higher potential rewards despite greater risks. Confident that controls, forward scanning and systems are robust.
This exercise defined our common corporate understanding of risk and established our corporate appetite for risk. In each area the Board has balanced its appetite for risk with a desire to capitalise appropriately where opportunities arise. This can be seen most clearly in the results for our customer and housing services and in areas related to our people and our approach to technology, where the outcome balances careful risk management with innovation. The Board will use the revised risk appetite to facilitate the development of our overall corporate strategy for dealing with risk, together with a framework for effective risk management and assurance, reviewing and resetting our:
- Detailed strategies, processes and controls for addressing specifically identified business risks
– Control strategies for monitoring, managing and mitigating specifically identified business risks
– Risk mapping outputs, stages and reporting.
## **Key strategic risks**
The Board has assessed our emerging and principal risks, their impact and our mitigations and these are set out in the table on the next page. They are arranged in order from the highest to lowest scoring strategic risk after mitigation, and the scores are a combination of the probability of a risk crystallising and its impact if it does.
**62 Southern Housing Group**
## **Risk appetite results**
**----- Start of picture text -----**
1. Minimal 2. Cautious 3. Open 4. Seek
Customer Service
3.0
Care Services
2.0
Homes – Housing Services 2.9
Growth – Organic
2.7
Growth – Inorganic
3.4
Communities
3.1
People and HR 3.5
Financial Viability/Resources 2.2
Health and Safety
1.4
Compliance and Regulation
1.2
Technology
3.3
Data Quality and Security
1.1
External Brand/Reputation
2.3
**----- End of picture text -----**
Our key risks reflect our focus as a business – keeping our customers safe, making sure our business is financially stable and well-governed, and delivering high-quality, compliant homes and services.
The Board’s review of key strategic risks during the year has resulted in a number of changes that have streamlined our strategic risk register. A single risk representing building safety and compliance has replaced the two previous risks, reflecting the equal importance of day-to-day building compliance across all health and safety strands and the specific threat posed by combustible cladding and other fire safety issues. Our Customer Safety Committee and Board oversee our performance across all health and safety areas. Our bespoke Building Safety Programme, in-house team of building safety managers and established Primary Authority are key components of our assurance framework.
Four financial risks have been consolidated into two strategic risks focused on the long-term financial viability of the Group and our access to liquidity. The latter is represented by a risk that considers unexpected funding challenges, reflecting the potential for volatility in the global financial markets as a result of the pandemic, together with more localised challenges posed by the UK’s exit from the European Union.
Two risks related to business continuity and governance through the Covid-19 period have been removed from the strategic risk register following the Board’s review. These were included at the beginning of the year as the pandemic escalated but our systems of control in business continuity management have proved to be extremely robust, with interim governance arrangements providing strong support for our underlying governance structures. Business continuity continues to be monitored closely at the operational level.
Two new risks have been added to the register. Our efficiencies programme is a very important part of improving our financial performance and driving further increases in value for money services to our residents. The strategic risk register recognises the risks associated with failing to deliver our portfolio of business change and summarises the governance in place to ensure that savings are generated and digital enhancements delivered. The register also acknowledges the risks associated with deteriorating levels of service delivery and quality, prompted by a number of changes in the Group’s operating environment including the publication of the Social Housing White Paper and the Housing Ombudsman Service’s new Complaint Handling Code. Our governance structure is a strong mitigation for risks in these areas as we benefit from the high levels of direct customer engagement from our resident scrutiny groups and their links to our Board.
Cyber security remains a significant risk across all sectors as threats become more prevalent and more sophisticated. During the year, we have obtained Cyber Essentials accreditation and established a security operations centre that monitors activity across our technology estate 24 hours a day, seven days a week. We recognise that human error remains the biggest single threat to combating a cyber-attack and we have a comprehensive programme of testing and training in place to ensure that our colleagues form a strong first line of defence.
In spite of the unprecedented challenges facing the Group and the nation in the past year, careful and active management of our key strategic risks has ensured that their likelihood and their impact has remained stable. New risks emerging as a result of the pandemic such as those affecting the Group’s income levels have been managed effectively within our existing risk framework.
Annual Report and Group Financial Statements 2020-21 **63**
**Risk management** (continued)
## **Strategic risk register**
## **Homes are not safe or compliant with legislative requirements**
- **Impact How we manage the risk** – Risk of injury or death – Rigorous landlord compliance regime in place – Poor customer service – Rigorous response to fire safety including proactive measures – Financial and regulatory consequences to improve the safety of high rise buildings and other homes that have increased fire risk
- – Criminal and/or civil prosecution – Primary authority in place and active in partnership with
- – Reputational damage Hampshire Fire and Rescue
- – Independent compliance audits – Quarterly performance reporting to and oversight from the Customer Safety Committee and Board
- – Monthly oversight from the Executive Management Team
## **Security breach affects infrastructure and data**
- **Impact How we manage the risk** – Service disruption – Oversight from Audit and Risk Committee – Data lost and/or corrupted and data protection compromised – IT Security Board in place – Fraudulent transactions lead to financial loss – Cyber Essentials certification – Regulatory consequences – 24/7 network monitoring through Security Operations Centre – ICO fines/sanction – Continual vulnerability assessment and remediation – Legal action – Ongoing data back-up and recovery – Reputational damage – Mandatory annual cyber security training for all staff
## **Financial viability is not fully protected**
- **Impact** – Non-compliance with funding covenants
- Unable to deliver services
- Unable to deliver corporate plan commitments
- Regulatory consequences
- Reputational damage
- Negative impact on credit rating
- Reduced access to funding
- **How we manage the risk** – Financial health indicators (FHI) in place that monitor financial viability, including financial covenant position
- FHI tested via the Board’s approved stress testing regime
- FHI monitored fortnightly by the Executive Management Team and quarterly by Finance Committee
- Financial Risk Mitigation Policy and recovery plan in place with strong oversight and rapid decision-making by the Board
– Reduced investment capacity
## **Unexpected funding challenges**
## **Impact**
- Insufficient liquidity to meet our obligations
- – Unable to deliver services
- Unable to deliver corporate plan commitments
- Regulatory consequences
- Reputational damage
- Reduced investment capacity
## **How we manage the risk**
- Treasury management policy in place
- Sufficient liquidity maintained at all times for at least 18 months’ committed spend, excluding any capital receipts
- Short-term cash flows prepared on a weekly basis
- Liquidity forecasts monitored by the Executive Management Team fortnightly and quarterly by Finance Committee and the Board
- Active funder relationship management
**64 Southern Housing Group**
## **Significant property market correction**
- **Impact How we manage the risk** – Reduced demand, income and surplus – Regular monitoring of KPIs by the Executive Management Team – Increased asset holding costs and Development Committee – Increased costs of programme delivery – Board oversight of market exposure through regular stress testing of the long-term financial plan
- – Asset impairment – Active management and marketing of unsold properties
- – Regulatory consequences
- Board oversight of market exposure through regular stress testing of the long-term financial plan
- – Active management and marketing of unsold properties – Conversion of sales units to private rent through Spruce subsidiary
- Conversion of sales units to other tenures
– Ability to slow development programme
## **Non-compliance with data protection legislation**
- **Impact How we manage the risk** – Adverse customer impact – Oversight of all data-related projects from Data and Information – ICO fines/sanction Governance Group – Legal action – Robust data protection processes and procedures in place – Regulatory consequences – Qualified corporate data protection team supports and monitors compliance across the business
- – Reputational damage – Mandatory annual data protection training for all staff
## **Business change portfolio not delivered**
- **Impact How we manage the risk** – Reduced customer service levels and satisfaction – Efficiencies Coordinating Group in place to manage delivery – Efficiencies savings not achieved and value for money of programme compromised – Service Charge Board in place to oversee delivery of service
- – No or poor return on technology investment charge improvements – Regulatory consequences – Digital strategy in place to direct service redesign and digitisation of services
- – Reputational damage – Delivery of change portfolio tracked by Group Portfolio
- – Negative impact on credit rating Management Office (GPMO)
- Reputational damage
- – Negative impact on credit rating – Reduced access to funding – Reduced investment capacity
- Oversight of performance against targets from the Finance Committee and Board
## **Deteriorating levels of service delivery and quality**
- **Impact** – Customer dissatisfaction with potential for an increase in formal customer complaints
- Property condition deteriorates and becomes unsafe
- – Reputational damage – Regulatory scrutiny and action – Housing Ombudsman sanction
- **How we manage the risk** – Customer service skills training for staff – Customer oversight from Resident Scrutiny Group – Robust processes for handling complaints with lessons learnt procedures in place
- KPIs monitored by the Executive Management Team and Board
## **Unable to attract and retain talented staff**
## **Impact**
– Poor customer service – Increased customer dissatisfaction – Loss of corporate memory – High staff turnover impacts remaining staff negatively – Increased recruitment and reward costs
- **How we manage the risk** – Talent management strategy in place – Active succession planning
- Active leadership and management development
- Regular staff engagement surveys with feedback used to improve approach and offer
- Business continuity planning ensures no single person areas of dependency
Annual Report and Group Financial Statements 2020-21 **65**
## **Going concern statement**
The Group’s business activities, its current financial position and factors that are likely to affect its future development are set out within the Strategic Review.
The Board’s assessment of going concern is focused on the Group’s liquidity and its compliance with loan covenants. The review period is 18 months from the signing of the financial statements.
The Group maintains its rigorous approach to financial planning, including the preparation of detailed budgets and forecasts for the next financial year. The Group’s budget is approved by the Board and forms the first year of the 30-year business plan (the ‘long-term financial plan’) which sets out the long-term objectives of the Group.
The Board has considered the ongoing impact of Covid-19 on its short-term forecasts, applying stress tests to the early years of the long-term financial plan that reflect the potential for heightened financial risk stemming from the effects of the pandemic. The Board considers these tests to represent a severe yet plausible view of the risks that may impact the Group. The tests consider the impact of adverse movements in macroeconomic indicators, as well as sharp reductions in development sales income and significant above-inflationary increases in costs. Tenant rent arrears are presumed to almost double in the period under review with a conservative assumption on eventual recovery also modelled. The Group is able to withstand these stresses while remaining fully compliant with its loan covenants and without employing any mitigating actions.
In line with its treasury management policy, the Group continues to maintain sufficient resources to cover at least the next 18 months’ committed cash flows, excluding sales receipts. This position is calculated net of any restricted cash. The Group’s detailed liquidity position is set out on pages 55 to 56 and at the year-end undrawn facilities and cash investments totalled £426.5m with sufficient headroom forecast against the Group’s liquidity policy.
No material uncertainties related to events or conditions that may cause significant doubt about the ability of the Group to continue as a going concern have been identified. On this basis, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months after the date on which the report and financial statements are signed. Accordingly, the directors continue to adopt the going concern basis in preparing the Group’s consolidated financial statements.
**66 Southern Housing Group**
## **Viability statement**
The Board has assessed the viability of the Group over a five-year period, being the first five years of the Group’s long-term financial plan.
This is consistent with prior years and represents the period over which cash flows associated with the Group’s development and investment activities can reasonably be forecast. The viability assessment is supported by the Group’s liquidity forecasts, its underlying long-term financial plan and consideration of the Group’s principal risks and uncertainties.
The long-term financial plan sets out how the Group manages its resources to ensure long-term financial sustainability and the safeguarding of social housing assets. The plan includes a significant provision for ongoing building safety spend, with the majority of the spend forecast during the five-year viability assessment period and limited provision for recovery of this expenditure.
The plan represents the maximum financial risk that the Board will accept in pursuing its development and growth objectives and it is subjected to severe, but plausible stress tests designed to explore how the plan reacts to a range of risks that may arise from the Group’s constantly evolving operating environment. Such risks are considered holistically and include the changing economic and political conditions that may result from the UK’s exit from the European Union.
The Group adopts a multivariate approach to stress-testing. Twenty-nine individual sensitivities and five composite scenarios have been applied to test the Group’s vulnerability to a wide range of stresses, which are presumed to affect the business simultaneously. The stress tests have been expanded to include specific consideration of the business’s susceptibility to risks arising from Covid-19.
- Key assumptions include:
- Significant, above-inflationary increases in capital and revenue expenditure while capping increases in index-linked income
- – Material, unbudgeted increases to building safety works and the removal of any recovery of building safety spend
- Increases to the all-in rate of future debt capital market issuance of at least 100 basis points
- Delays in sales transactions, reflecting prolonged market disruption from building safety issues and related mortgage lender hesitation as well as the potential impact of Covid-19 on demand
- Reductions in sales values that are deeper than current analyst expectations, at 10% in 2022-23 with a further drop of 5% in 2023-24
- Extension to development periods as works are slowed to manage potential market sales exposure
- Increases in void costs to reflect a backlog of lettings caused by Covid-19
- A 50% increase in arrears from current levels which are in turn assumed to crystallise into higher levels of bad debt.
Under these stresses, the Group remains compliant with its financial covenants throughout the period under review, and for the duration of its long-term financial plan, with no changes assumed to the existing development plan and no mitigating actions employed. The Group also maintains sufficient liquidity to meet its obligations as they fall due. Under the perfect storm scenario specifically modelled to break the plan, a recovery plan has also been prepared.
The Group’s current liquidity position is set out on pages 55 to 56 and at the year-end undrawn facilities and cash investments totalled £426.5m with forecast headroom against the Group’s liquidity policy of £97.8m. £480.7m of the £620.4m loan facilities expiring within five years relate to revolving credit facilities which are expected to be rolled forward as they fall due.
Long-term liquidity forecasts are monitored on a fortnightly basis by the Executive Management Team and reported regularly to the Finance Committee and the Board, along with detailed short-term cash flow forecasts which include an analysis of variances between projected and actual cash flows. This ensures that the Group has the funds available to meet its short-term operational needs as well as supporting the Group’s strategic objectives and safeguarding its long-term viability. All forecasts exclude restricted cash.
In April 2020, the Regulator of Social Housing published its viability rating for the Group following its in-depth assessment (IDA). The Group was re-graded from V1 to V2, retaining a compliant regulatory rating. The Group has maintained its V2 rating during the year.
Based on the results of the Group’s long-term financial plan stress-testing and the Group’s forecast liquidity position, together with the assurance of its regulatory assessment, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period under review. The Board is satisfied that the Group has the financial capacity to withstand a range of severe yet plausible adverse scenarios while maintaining continued compliance with its financial covenants, the requirements of the Regulator and the risk appetite of the Board.
Annual Report and Group Financial Statements 2020-21 **67**
SouthEtn Housing Group
# **Governance report**
Chair’s introduction **70** Governance report **71** Our Board **76** Operating structure 2020-21 **80** Remuneration and Nominations Committee report **82** Audit and Risk Committee report **85** Statement of the Board’s responsibilities **88**
Annual Report and Group Financial Statements 2020-21 **69**
## **Chair’s introduction**
**Arthur Merchant** Chair of the Board
## **Building greater trust, transparency and accountability**
In 2019, we introduced some far-reaching changes to our governance structure, creating a Finance Committee to focus on financial and treasury matters and significantly increasing the focus on safety and resident involvement with a new Customer Safety Committee and Community Investment and Care Committee, together with the introduction of our Resident Scrutiny Group. This review reflected our understanding of the need to prioritise robust governance, safety and greater opportunities for resident involvement and scrutiny. Our objective for the Group’s governance framework is to ensure that we operate to the highest standards. I have been impressed with the contribution and perspective our Resident Scrutiny Group has already been able to bring – for example to our procurement review.
## **Diversity and inclusion**
## **Governance highlights**
I have had the privilege of chairing the Board of Southern Housing Group for five years now and this last year has certainly been one of the most demanding of my tenure.
## **Adapting to the pandemic**
In common with all organisations adapting to working through a pandemic, our Board did not meet in person during this period. We did, however, convene virtually –14 times – which is more than we would have done normally. This increased frequency reflected two concurrent themes: a need to maintain a close oversight of the business during the pandemic’s rapidly evolving challenges while ensuring we flexed our strategic response appropriately; and a collective desire to focus on assurance and governance following the Regulator’s IDA downgrade of the Group from G1 to G2 in early 2020. We have been working closely with the Regulator to address the issues that led to the downgrade and all the related actions have been completed.
Diversity and inclusion across the Group is important to us. For the Board and committees it is clear that we have made some progress towards our objectives but we still have some work to do to ensure that BAME representation is increased.
## **Focus on the future – strategic collaboration for better services, building safety and sustainability**
A clear focus for the Board going forward is the need to build greater trust, transparency and accountability. We have made this one of our headline objectives for the Group and this will bring greater opportunities for us to listen to our residents and involve them in our decision-making and performance.
This year we were approached by Sanctuary Group to explore a possible business combination. Although we decided not to take our discussions further, what did come out of those conversations was the strategic value of partnership and local collaboration in contributing to the resilience and adaptability of our organisation.
As we move into the next few years in such a challenging environment, I believe that it will be through strategic collaboration between housing providers, residents and our stakeholders that we will succeed in continuing to provide much needed homes and support services, enable our focus on investing in building safety and set us on a clear path to carbon-neutrality.
## **Thank you**
A final note from me. I’d like to thank the members of our Board and committees for their time, dedication and expertise in guiding the Group through this difficult year. The Group’s senior leadership team have consistently demonstrated their high level of professionalism and resilience as we have adapted our business to unprecedented times and our thanks go out to everyone across the Group.
## **Read more about our approaches to:**
**Arthur Merchant** Chair of the Board
– Building safety on pages 11, 12 and 34.
> – Sustainability on pages 35-37.
> – Resident involvement on page 41.
– Equality, Diversity and Inclusion on page 50.
**70 Southern Housing Group**
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Governance
report
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## **Statement of compliance with the regulatory standards**
Our regulator, the Regulator of Social Housing (RSH), publishes a regulatory framework and regulatory standards. The regulatory standards comprise:
- The economic standards – the governance and financial viability, value for money and rent standards
- The consumer standards – tenant involvement and empowerment, home, tenancy and neighbourhood and community standards.
One of the core economic standards is governance and financial viability. This requires Registered Providers (RPs) to have effective governance arrangements in place that deliver their aims, objectives and intended outcomes for tenants and potential tenants in an effective, transparent and accountable manner. It also requires RPs to manage their resources effectively, to make sure their viability is maintained while ensuring that social housing assets are not put at undue risk.
As part of being regulated by the RSH, Southern Housing Group has been given a rating for governance, as assessed against the governance and financial viability standard. Following an in-depth assessment carried out by the RSH in 2019, Southern Housing Group was given a G2 governance and V2 financial
viability rating, both of which are compliant ratings, for the financial year ended 31 March 2020. These ratings were reconfirmed by the RSH in January 2021 following its routine stability checks. An in-depth assessment was not conducted during the year under review.
Each year the RSH requires RPs to assess their compliance with the governance and financial viability standard and provide assurance to customers and stakeholders that the RSH specific expectations are being complied with.
We have undertaken an annual review of compliance. The Board is assured that Southern Housing Group is compliant with the regulatory framework including the governance and financial viability standard and its accompanying code of practice.
The Board is committed to ensuring that we comply with our legal and regulatory responsibilities, including the Modern Slavery Act 2015. Our modern slavery statement is available on our website at **shgroup.org.uk/about-us/legal/modernslavery-and-human-trafficking**
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Pankhurst Avenue, Brighton
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Annual Report and Group Financial Statements 2020-21 **71**
**Governance report** (continued)
## **Compliance with the UK Corporate Governance Code**
The Regulator of Social Housing requires all registered providers Southern Housing Group’s assessment of compliance against the to adopt a code of governance. Southern Housing Group Board principles of the UK Code has concluded that in the year ending has chosen to adopt the UK Corporate Governance Code 31 March 2021 it has complied with the main principles of the UK (the UK Code) on a ‘comply or explain’ basis. Code as they apply to the Group. The table below summarises the principles of the UK Code that are not applicable or are relevant only to listed companies. **Principle A** – A successful company is led by an effective and As a Community Benefit Society and non-profit company entrepreneurial board, whose role is to promote the long-term we do not generate value for shareholders but generate public sustainable success of the company, generating value for benefit to wider society. shareholders and contributing to wider society. **Provision 3** – In addition to formal general meetings, the chair As a Community Benefit Society and non-profit company should seek regular engagement with major shareholders in we do not have major shareholders with whom to engage order to understand their views on governance and and consult. performance against the strategy. Committee chairs should seek engagement with shareholders on significant matters related to their areas of responsibility. The chair should ensure that the board as a whole has a clear understanding of the views of shareholders. **Provision 4** – When 20% or more of votes have been As a Community Benefit Society and non-profit company cast against the board recommendation for a resolution, we do not have shareholders with whom to engage and consult. the company should explain, when announcing voting results, what actions it intends to take to consult shareholders in order to understand the reasons behind the result. An update on the views received from shareholders and actions taken should be published no later than six months after the shareholder meeting. The board should then provide a final summary in the annual report and, if applicable, in the explanatory notes to resolutions at the next shareholder meeting, on what impact the feedback has had on the decisions the board has taken and any actions or resolutions now proposed. **Provision 30** – In annual and half-yearly financial statements, The Group is not a listed company and therefore is not required the board should state whether it considers it appropriate to to publish half yearly financial statements, but does comply with adopt the going concern basis of accounting in preparing them, the going concern basis of accounting while preparing its annual and identify any material uncertainties to the company’s ability financial statements. to continue to do so over a period of at least 12 months from the date of approval of the financial statements. **Provision 36** – Remuneration schemes should promote As a Community Benefit Society and non-profit company long-term shareholdings by executive directors that support we do not have shareholders who hold shares in the sense set out in this section.
**Provision 36** – Remuneration schemes should promote long-term shareholdings by executive directors that support alignment with long-term shareholder interests. Share awards granted for this purpose should be released for sale on a phased basis and be subject to a total vesting and holding period of five years or more. The remuneration committee should develop a formal policy for post-employment shareholding requirements encompassing both unvested and vested shares.
**72 Southern Housing Group**
## **Governance structure**
**Committee structure, membership, roles and responsibilities Committee structure with chairs and responsibilities**
||||
|---|---|---|
||||
|||Oversees fnance and treasury management within the Group.
**Finance Committee**
Joanna Hawkes|
||||
||||
|||Oversees the development and investment strategy of all the
Group’s companies, including new property developments and
stock reinvestment.
**Development Committee**
Robert Clark|
||||
||||
|||Reviews and approves the Group’s pay policy and oversees
the pension strategy. Makes recommendations to the Board
on remuneration for NEDs, the structure, size and composition
of the Board.
**Remuneration and**
**Nominations Committee**
Abi Gray|
||||
||||
|||Provides assurance to the Board on the effectiveness of
the Group’s risk and internal control frameworks, fnancial
reporting and accounting issues.
**Audit and Risk Committee**
Janet Collier|
||||
||||
|||Oversees the Group’s care and supporting independence,
community investment and sheltered housing activities.
**Community Investment**
**and Care Committee**
Mary Watkins|
||||
||||
Annual Report and Group Financial Statements 2020-21 **73**
**Governance report** (continued)
## **Division of responsibilities**
## **Chair**
The Chair of the Group Board provides overall leadership to the Group, in close co-operation with the Chief Executive, in a manner which maximises the contribution of board members and staff alike to enable them to fulfil their responsibilities for the overall governance and strategic direction of the Group. The Chair ensures that the Board functions effectively, that there is an agreed strategy that determines the Group’s objectives, that the boundaries of management authority are clearly defined, and that external relations are maintained. The Chair is responsible for the annual appraisal of the Chief Executive.
## **Chief Executive**
The Chief Executive reports directly to the Chair and is responsible for driving the strategy of the Group, ensuring that the objectives are achieved, and performance is reported to the Board. The Chief Executive is responsible for setting the tone of the business and ensuring the desired culture is embedded throughout the workforce.
The Chief Executive leads the Executive Management Team (EMT) in the day-to-day running of the business, including implementing the Board’s decisions. The Chief Executive leads the EMT in ensuring the Group’s policies and procedures are adhered to and that the Group’s risks are monitored and managed within the Board’s approved risk appetite.
## **Senior Independent Director**
The Senior Independent Director (SID) adds value to the business of the Group by acting as a sounding board for the Chair and as an intermediary for other directors, contributing experience, expertise and insight to determine the overall business. The SID is available to other board members in cases of conflict acting as a conduit for other board members to raise concerns which have not been resolved through the normal channels regarding the Chair, the Chief Executive or other board members. The SID also meets with other board members, without the Chair present, to appraise the Chair’s performance taking into account the views of executive directors.
The Board is scheduled to meet five times a year but also meets more frequently when needed. For example, during the coronavirus pandemic, it met 14 times for a formal Board meeting, and also met informally in between as needed. All meetings during the pandemic were conducted remotely. The Board also has two strategy setting events in spring and autumn.
Each Board meeting has a planned agenda, which allows enough time to discuss both strategic and operational matters and includes consideration of performance and risk management.
## **Committees**
The Board delegates authority in certain matters, according to specific terms of reference, to six committees. Committee membership consists of both Group Board members and independent committee members. This mix strengthens the experience and different skills available to the organisation whilst ensuring that the Group Board remains a manageable size and provides value for money. This model enhances decision-making, providing a clear overview which helps to focus the Group’s management on achieving its strategic objectives. Each committee meets at least four times a year.
## Audit and Risk Committee
The Audit and Risk Committee recommends the appointment or reappointment of our external auditors, considers the audit approach taken and reviews findings. The appointment of the external audit firm is re-tendered at regular intervals. This Committee reviews the annual financial statements of the Group before recommending them to the Board for approval. The Committee also oversees accounting policy and consistency across the Group. It is responsible for reviewing the Group’s internal controls and its risk management framework, and regularly reviews the Group’s top risk register. It also regularly reviews all external and internal audit and similar reports and provides constructive challenge to the Executive Management Team (EMT) on external and internal audit findings and closely monitors their implementation.
## Remuneration and Nominations Committee
## **The Board**
The Group’s Board is collectively responsible for the long-term success of the Group. To retain control of key decisions and to provide a clear division of responsibility between the running of the Board and the running of the business, the Group Board has identified reserved matters that only the Board can approve. Other matters have been delegated to the committees. Any matters outside of these delegations fall within the Chief Executive’s responsibility and authority.
## Matters reserved to the Group Board include:
- Determining the strategic direction of the Group and setting out its mission, vision and values
- Approving higher-level strategies, long-term plans and objectives to achieve the vision
- Financial control
- Risk appetite and management
- Governance and the system of delegation
- Monitoring the Group’s performance
- Accountability to stakeholders
The Board, subsidiary boards and each committee receives sufficient, reliable, and timely information in advance of meetings and are provided with or are given access to all the necessary resources and expertise to enable them to undertake their duties in an effective manner.
The Remuneration and Nominations Committee is responsible for reviewing and recommending Board and Committee remuneration, together with succession planning, ensuring there is a plan for the orderly succession of new appointments to the Board(s) and committees to maintain an appropriate balance of skills and experience within the Group’s governance structure. This Committee oversees the Group’s pension strategy and arrangements and approves the Group’s Pay Policy and Code of Conduct. It also ensures there is an appropriate induction and training framework in place for Board and Committee members. The Committee reviews the pay of executive members of the Board, giving due consideration to peer comparison, pay ratios and gaps assuring proportionality and alignment to the Group’s culture. Executive directors are eligible to receive non-contractual rewards available to the Group’s entire workforce at the discretion of the Remuneration and Nominations Committee in connection with organisational performance. The only executive director on the Group Board is the Chief Executive, whose pay is published in the financial statements.
## Finance Committee
The Finance Committee oversees finance and treasury management within the Group, including: oversight of Group financial stability; budgets, forecasts and long-term financial planning; financial/budgetary performance and management accounts; financial strategy; treasury management strategy and arrangements; and intra-group lending.
**74 Southern Housing Group**
## Development Committee
The Development Committee considers matters relating to the development and investment strategy of all the Group’s companies, including new property developments and stock reinvestment. This Committee is responsible for ensuring the proper assessment and regular monitoring of development risk. It is also responsible for reviewing the Group’s sales strategy and recommending it to the Board for approval, as well as regularly reviewing and monitoring the Group’s sales programme.
## Customer Safety Committee
The Customer Safety Committee has the delegated authority for overseeing the Group’s customer health and safety and compliance requirements and obligations, and asset management in respect of health and safety compliance.
It reviews strategies and policies, and internal audit reports where these are related to customer health and safety and safeguarding. It monitors and oversees all matters relating to customer health and safety and safeguarding compliance through risk and Key Performance Indicator analysis.
## Community Investment and Care Committee
The Community Investment and Care Committee has the delegated authority for overseeing the Group’s care and supporting independence, community investment and sheltered housing activities. It has responsibility for the oversight of associated policies and procedures, service level agreements with contractors and local authorities and Key Performance Indicators. It also has responsibility for oversight and support of the Group’s resident engagement structure.
## **Resident Scrutiny Group**
The scrutiny function consists of the Resident Scrutiny Group and supporting steering groups who engage with residents to help shape services and aim to hold the organisation to account for its performance. Board members attend scrutiny meetings: there is one permanent position and another rolling position. The Chair of the Resident Scrutiny Group is able to report directly to the Board on issues arising.
There is a Resident Engagement Strategy in place to ensure residents’ voices are heard throughout the organisation.
## **Board membership and attendance 2020-21**
The table below shows each Board member’s attendance at meetings of the Board and any committees they are members of during the financial year.
|
the fnancial year.||||||||
|---|---|---|---|---|---|---|---|
|||||Community||||
|||||Investment|||Remuneration|
|||Audit and Risk|Development|and Care|Customer Safety|Finance|and Nominations|
||Board|Committee|Committee|Committee|Committee|Committee|Committee|
|**Non-Executive**||||||||
|**Board Members**
Arthur Merchant
Carol Rosati
Robert Clark|14/14
14/14
14/14|3/4
–
–|1/4
–
4/4|1/4
–
–|2/4
2/4
–|4/6
2/6
3/6|5/5
1/5
–|
|Mary Watkins|14/14|–|–|4/4|–|–|–|
|Joanna Hawkes
Janet Collier
Abi Gray|12/14
14/14
14/14|–
4/4
–|1/4
–
–|–
–
–|–
–
–|6/6
3/6
–|–
–
5/5|
|David Lewis|14/14|–|–|–|4/4|–|1/5|
|Simone Buckley|14/14|–|–|–|4/4|1/6|–|
|Alfons Dankis|7/14|–|–|–|–|–|–|
|**Executive**||||||||
|**Board Members**||||||||
|Alan Townshend|14/14|3/4|4/4|2/4|4/4|5/6|5/5|
Denotes Chair Ex officio role As observer
Annual Report and Group Financial Statements 2020-21 **75**
## **Our Board**
All board members are independent members of the Board, other than the CEO who is an executive director.
One board seat is reserved for a resident board member who is appointed in the same way as all other members, is subject to the same tenure rules, receives the same remuneration, and is required to abide by the same codes of conduct including declaring any conflicts of interest.
To manage any conflicts of interest that may arise, all members complete and update their declaration of interests form annually. Any interests are recorded, and relevant interests are reported to the external auditors as part of their annual audit. Any interests arising during Board or Committee meetings are recorded in the minutes of each meeting.
## **Chair**
## **Senior Independent Director**
## **Arthur Merchant**
Arthur became Chair of the Group Board in July 2016. He is a former partner and Head of Housing for Grant Thornton UK PLC. He specialised in the provision of external and internal audit, business planning, governance and risk management services to the housing sector for over 20 years. His client portfolio also included the local authority, NHS and education sectors. He is a qualified accountant (CIPFA) serving as a member of CIPFA’s housing association panel for over 10 years. Arthur is an experienced non-executive director having served on the boards of the Hertfordshire Chamber of Commerce, Mind and three other large housing providers. His experience includes chairing audit and treasury committees and being part of a non-executive working group/committee successfully achieving substantial renegotiation of loan covenants and refinancing at two housing associations.
## **Carol Rosati OBE**
Carol is the Board’s Senior Independent Director (SID). She has over 25 years’ experience of talent management and workforce development, focusing on diversity and inclusion. She is currently lead Equality, Diversity and Inclusion specialist at the Met Office. She is also a qualified executive coach and runs her coaching business v2 Coaching. Carol joined the Group Board in 2014 and chaired the Remuneration and Nominations Committee from 2016 to 2019, before being appointed as SID. She is Vice Chair of UN Women UK and chairs their Nominations Committee. In 2020, she also joined the Board of Alliance Homes based in Somerset. She was awarded an OBE in the Queen’s 2015 Birthday New Year’s Honours List for Services to Women in Business.
Arthur is a regular speaker at major housing events and conferences.
**76 Southern Housing Group**
## **Members**
## **Simone Buckley**
Simone joined the Group Board in July 2015. She was previously Chair of the Group’s South Region Resident Services Panel and a Customer Services Committee member. Simone is a member of the Group’s Customer Safety Committee and provides a link with the Group’s Resident Scrutiny Group. Simone has over 15 years’ experience working within blue chip organisations both in the UK and Australia, specialising in change management, communications and business integration.
## **Joanna Hawkes**
Joanna joined the Board in July 2017 and chairs the Group’s Finance Committee. She has over 30 years’ experience in the private sector having worked with a number of blue-chip companies in various sectors in corporate finance and treasury roles. This has included asset finance roles with Hilton International and treasurer of rolling stock lessor Angel Trains. She left her role of Group Treasurer of Marks and Spencer plc to take up a role as Director of Corporate Finance at Transport for London. She is a fellow of the Association of Corporate Treasurers and a qualified accountant. She is also Chair of the Finsatra DB pension scheme.
## **Members**
## **Robert Clark**
Robert has been a qualified member of RICS since 1974 and retired as CEO of Durkan Ltd in 2016. As Managing Director and CEO, Robert was responsible for the management of all construction projects, business planning and HR management. His board and committee experience has included joint venture companies, housing associations, construction skills training, The Housing Forum and The Hertfordshire Housing Conference.
## **Janet Collier**
Janet chairs the Group’s Audit and Risk Committee and the Crown Simmons subsidiary board, having joined the Group Board in September 2018. She is a CIPFA accountant with over 30 years’ public sector experience. She has worked at a number of local authorities in both housing and corporate finance and was previously Deputy Chief Executive and Director of Finance at City West Homes. She has also worked as a consultant providing financial consultancy and training for public sector organisations, especially on social housing finance and value for money. She is an experienced non-executive having been a board member and Chair of Audit Committee at another housing association and is currently also a board member and Chair of Audit and Risk at Advance Housing and Support.
Annual Report and Group Financial Statements 2020-21 **77**
**Our Board** (continued)
## **Members**
**Abi Gray**
Abi joined the Board in September 2019 and chairs the Group’s Remuneration and Nominations Committee, having served on the Committee for two years. Abi has 10 years’ customer services experience, specialising in building customer-centric cultures by empowering employees to deliver excellent customer service. Abi is a qualified coach, counsellor and a specialist in employee engagement. Abi was previously also a member of the Customer Services Committee.
**Alan Townshend**
Alan has over 33 years of experience in the affordable housing sector, working with both public and private companies and running his own consultancy firm. Alan became Group Chief Executive in September 2018, having previously been Group Development Director for three years. Prior to joining the Group, Alan worked at Wandle Housing, initially joining as its Asset Investment Director before being appointed Interim Chief Executive Officer and overseeing the operational and strategic side of the business. His other roles include seven years at Circle Group as Group Regional Operations Director. Alan is a member of the Chartered Institute of Housing.
## **Members**
**David Lewis**
David chairs the Group’s Customer Safety Committee. He joined the Group Board in September 2019 and has over 25 years’ asset management, regeneration and procurement experience in local government, Arm’s Length Management Organisations (ALMOs) and housing associations. David has held both non-executive director and director positions for G15 housing associations and is a member of the Chartered Institute of Housing and RICS.
**Mary Watkins, Baroness Watkins of Tavistock** Mary joined the Board in July 2018 and chairs the Group’s Community Investment and Care Committee. She has extensive board experience in the housing and health and social care sectors and chaired the Quality and Governance Committee at South Western Ambulance Service Foundation NHS trust, where latterly she was Deputy Chair and Senior Independent Director. Her experience has involved significant changes to the businesses in which she has been a board member including the amalgamation of two NHS providers and two housing associations. She is a qualified nurse, has held a University Senior Deputy Vice Chancellor position and published extensively in the fields of health and social care. She is a Visiting Professor at King’s College London. Mary was appointed a Crossbench Life Peer in 2015 and speaks regularly on housing issues.
**78 Southern Housing Group**
## **Members who left the Board in 2020-21**
Alfons Dankis retired from the Group Board in September 2020. He was formerly Chair of Crown Simmons.
## **Board evaluation**
During the year, we commissioned highly experienced governance consultants, Altair, to carry out an external board evaluation and support board member appraisals, improving the effectiveness of our governance. The evaluation confirmed that our Board is made up of appropriately skilled and experienced independent directors who are appraised effectively on an annual basis. Development plans are developed as a result of appraisal feedback and are in place for directors as appropriate. Succession planning is effective and actively managed.
## **Board and committee diversity analysis**
Each year, as part of our Board evaluation, we report on the Board’s diversity across a number of characteristics to the Remuneration and Nominations Committee. This informs succession planning and board member recruitment. Improving diversity across our governance is integral to the way in which we embrace and promote diversity as an organisation. Our approach to diversity is set out in our Equality, Diversity and Inclusion strategy which has been developed in partnership with our Remuneration and Nominations Committee. As well as the Equality Act protected characteristic strands, we also include ensuring our residents’ voice is strongly represented throughout our governance structure as part of our board diversity. During 2020-21 one board place was reserved for a resident board member. We will increase this representation as board positions become vacant.
## **Age**
the average NED age is **58**
## **Ethnicity**
|White|BME|
|---|---|
|**90%**|**10%**|
## **Sex**
|Female||Male|
|---|---|---|
|**Tenure**
**60%**||**40%**|
|0-3 years|4-6 years|7-9 years|
|**44%**|**45%**||
|||**11%**|
Annual Report and Group Financial Statements 2020-21 **79**
**----- Start of picture text -----**
Operating
structure
2020-21
**----- End of picture text -----**
**----- Start of picture text -----**
CEO Customer Commercial Development Resources
Services and Growth
Alan Chris Harris Yvette Carter Oliver Boundy Amanda
Townshend Holgate
Human Resources Home and Southern New Business Corporate Finance
Property Maintenance
Services
Property Estate Care Delivery Operational
Maintenance Finance
and Investment
Sheltered Southern Sales and Governance
Housing Construction Marketing
Community Commercial Communications Information
Investment Property and and External Technology
and Care Private Rent Affairs and Data
Supporting Strategy
Independence and Policy
and Care
Customer
Operations
Triathlon Homes
**----- End of picture text -----**
**80 Southern Housing Group**
## **Executive biographies**
**Oliver Boundy Executive Director**
## **Development and Growth**
Oliver has worked in the housing sector for over 15 years. After joining the Group as New Business Director in 2016, Oliver established and led a highly successful New Business Team and was instrumental in increasing delivery of new homes through site acquisition, partnership working and a strong new business pipeline. Oliver took over as Executive Director Development and Growth in September 2018.
**Chris Harris**
## **Executive Director Customer Services**
Chris was Executive Director of Customer Services between 2016 and 2021. As a member of the Group’s Executive Management Team, Chris was responsible for setting the strategic direction for customer services. During the year, Chris led the teams that provide customer, property, residential and care services, along with community, financial and employment and training support to a wide range of people.
**Yvette Carter**
## **Executive Director Commercial**
Yvette joined the Group in 2019 to lead our newly created Commercial Directorate which covers Southern Maintenance Services (our in-house repairs and maintenance service), Spruce Homes (our private rent business), Southern Housing Construction (our in-house construction company), Estate Care (our in-house caretaking and estate maintenance service) and Commercial Property.
Yvette has previously worked with Mears Group PLC and has a breadth of experience at senior level across many sectors.
## **Amanda Holgate Executive Director Resources**
Amanda joined the Group in 2019 and is responsible for several departments including corporate and operational finance; governance; IT and data; and the Group’s portfolio management office.
Amanda previously served as Finance Services Director at Peabody and Deputy Finance Director at Family Mosaic. Prior to joining the social housing sector in 2014 she gained more than 20 years’ experience in financial, commercial and infrastructure support roles across a wide range of industry sectors including manufacturing and wholesale, technology consulting, retail and financial services.
**Alan Townshend**
## **Group Chief Executive**
Alan leads the executive team and is a member of the Group Board. His biography can be viewed on page 78.
Annual Report and Group Financial Statements 2020-21 **81**
## **Remuneration & Nominations Committee report**
## **Statement from Committee Chair – Abi Gray**
Each year, the Remuneration and Nominations Committee undertakes an evaluation of its performance to provide assurance to the Group Board that it is fulfilling its terms of reference. On behalf of the Board I am pleased to present the Committee’s annual report, confirming that, during the year, the Committee once again satisfied the remit delegated to it by the Board.
The membership of the Committee is made up of a maximum of five independent members plus the Group Chair as an ex officio member. Executive directors do not sit on the Committee but can attend at my invitation. The Chair of the Group Staff Forum is a co-opted member. Committee membership changed during the year with Diane Lennan joining Julie Blair, Debbie Mansfield and me in June 2020.
During 2020-21, we met on five occasions in April, June, September, November 2020, and in March 2021. As Committee Chair, I provided a summary of each of the Committee’s meetings to the Group Board.
We undertook a range of work during the year, covering all items in our terms of reference. At each meeting we received comprehensive reports covering non-executive and staffing matters, and governance issues including governance contingency arrangements in response to the coronavirus pandemic.
## **Highlights for the year**
## **Board evaluation**
We supported the wider board and committee member appraisal process, ensuring that it was fit for purpose and that non-executive and independent member appraisals were carried out in a timely and effective way. We also supported the Group Board’s Senior Independent Director in leading on the Group Chair’s appraisal, making sure that non-executive and executive directors had an opportunity to give feedback.
Importantly, we played a key role in procuring a board and governance effectiveness review by external consultants, Altair, and in implementing elements of the resulting governance development plan that were within our remit. These activities formed part of the Group’s response to the in-depth assessment by the Regulator of Social Housing.
Altair were asked to complete a review of the effectiveness of the Group’s Board to evidence compliance with the regulatory standard and the UK Corporate Governance Code. The scope of the review covered Board’s strategic focus and understanding, the effectiveness of risk management, relationships within the Board, with committees and with the executive team, meeting management and effectiveness, and member roles and responsibilities.
The review found that there is a positive and professional culture and supportive relationships between Board Members, including the Chairs, and with the executive team. The Board is well-balanced and functioning well with a good degree of openness and inclusivity. There is a good range of skills and experiences across the membership who feel able to actively contribute. Improved outcomes from the evaluation included further developing member training and development plans, a more dynamic skills matrix and succession plan plus better integrated agendas and improved forward planning. Induction processes for new members have also been strengthened. None of the recommendations were considered to be material and they do not impact the composition of the Board.
Altair also supported the Group to prepare for an in-depth assessment by the Regulator of Social Housing and in the preparation of the subsequent improvement plan. They have supported us in providing third-party assurance on implementation of the recommendations. They have no other connections with the business or with any of the directors.
As part of the governance development plan, we reviewed and approved a refreshed code of conduct and conflicts of interest policy and process.
**82 Southern Housing Group**
## **Succession planning and appointments to the Board**
On behalf of the Board, we oversaw succession planning, taking into account both the skills needed for effective governance, and the need to improve diversity on all boards and committees. As part of our Group Equality, Diversity and Inclusion strategy, we have set a target to have 30% BAME membership on our boards and committees by 2025. We will achieve this through a diversity-positive approach to succession planning and member recruitment as opportunities arise.
We reviewed our skills matrix development and monitoring, receiving updates on our position at each of our meetings. We have ensured that our skills matrix covers the expertise needed to govern the business effectively and to reflect the requirements of our corporate strategy. We defined our key board skills to be:
- Strategic leadership and scrutiny
- Human resources and organisational management
- Information technology and data management
- Public relations and communications
- Housing management/service users’ needs and aspirations
- Financial and treasury management
- Governance, risk, regulation, compliance and assurance
- Development, regeneration and sustainability
## **Diversity and inclusion**
In September, we considered the Group’s revised Equality, Diversity and Inclusion strategy before recommending it to the Board. The strategy has three broad aims:
- Advance equality of opportunity by developing effective leadership that promotes equality, diversity and inclusion
- Eliminate discrimination and have an inclusive work environment where staff respect and value each other’s and our customers’ diversity and wellbeing
- Develop an excellent understanding of our customers to ensure services are delivered in a way that does not discriminate, promotes equality and inclusion and respects the diversity of our customers and the communities in which they live.
We were pleased to note that, as part of a range of performance measures on delivering the strategy, progress will be reported regularly to the executive team and the Group Board while this Committee will continue to monitor workforce representation quarterly.
We reviewed the Group’s Gender Pay Gap information prior to publication of the data on the government portal. We also supported the development of ethnicity pay gap reporting for the Group and this will be published on the Group’s website from 2021-22.
- Community investment and community development
- Government, community and stakeholder relationships.
As a result of the Board evaluation work, we focused on the implementation of key improvements to both succession planning and board skills development, including aligning our skills requirements to our latest strategy, and ensuring that succession planning and recruitment takes into account the changing skills gaps on the Board as members join and leave.
In addition, we ensured there was a programme of learning and development to support members in regularly updating their skills and knowledge, and familiarity with the Group.
Women earn **83p** for every £1 that men earn when comparing median hourly pay
In line with our commitment for BAME representation at Board, the Committee was also pleased to support the aim to reach 30% BAME representation in executive roles by 2025. However, we are mindful of the importance of recognising the other protected characteristics and ensuring that we are considering all diversity strands during recruitment to these roles.
Gender pay gap key statistics:
- Women earn 83p for every £1 that men earn when comparing median hourly pay. Their median hourly pay is 16.8% lower than men’s
- When comparing mean (average) hourly pay, women’s mean hourly pay is 15.2% lower than men’s
- Women occupy 43.2% of the highest paid jobs and 70% of the lowest paid jobs.
Annual Report and Group Financial Statements 2020-21 **83**
**Remuneration & Nominations Committee report** (continued)
## **Upper hourly pay quarter (highest paid)**
|Women|Men|
|---|---|
|**43.2%**|**56.8%**|
## **Upper middle hourly pay quarter**
|Women|Men|
|---|---|
|**63.8%**|**36.2%**|
## **Lower middle hourly pay quarter**
|Women|Men|
|---|---|
|**58%**|**42%**|
## **Lower hourly pay quarter (lowest paid)**
|Women|Men|
|---|---|
|**70%**|**30%**|
## **Approach to remuneration**
Southern Housing Group Limited’s Board and committee members are paid for their services. This increases our ability to attract and retain high-calibre members and to improve mechanisms for their performance appraisal and development.
We carry out a triennial review of non-executive director remuneration but this did not fall due in 2020-21. We did look at non-executive director expenses and recommended a revised policy to Board. We also recommended a revised approach to board member recruitment and selection.
## **Current annual payment rates**
||**Current annual payment rates**||
|---|---|---|
||**Role**|**Salary**|
||GroupChair|£25,000|
||Member and Chair of committee||
||or subsidiaryboard|£12,000|
||Member|£10,000|
||Additional payment for||
||Senior Independent Director
Independent Committee Member|£2,000
£3,000|
On the executive side, the Committee considered the staff pay policy in light of the need to attract and retain people while being mindful of the efficiencies agenda across the Group. Following discussions, we were able to recommend a robust pay policy to the Board. In keeping with our values as a business with a social purpose, we were pleased to recommend the continued adoption of the Living Wage principle. The pay policy operated as intended during the year.
The pay of executive directors is set by comparison with G15 peers, using a simple salary approach reflecting the strategy of the Group which balances both short- and long-term objectives whilst ensuring remuneration remains simple, transparent and provides value for money. In reviewing this area, the Committee gives due consideration to pay ratios and gaps assuring proportionality and alignment to the Group’s culture. The remuneration of Executive Management Team directors (excluding the Chief Executive) is presented to the Committee by the Chief Executive.
Executive team remuneration was last reviewed in June 2020. The Chief Executive presented a paper to the Committee that confirmed that salaries continued to be in line with market rates. The Committee supported the recommendation that there would be no increase to salaries for any of the executive team during the pandemic. The Committee felt that this was the most appropriate action and was in line with the ethos and culture of the Group.
Executive directors are eligible to receive non-contractual rewards available to the Group’s entire workforce at the discretion of the Committee and in connection with organisational performance. The only executive director on the Group Board is the Chief Executive, whose pay is published in these financial statements.
A formal workforce advisory panel, the Group Staff Forum, is in place to promote the views of the Group’s employees. The Chief Executive and the Chair of the Group Board both attend the Group Staff Forum meetings and the Chair of the Group Staff Forum is an ex officio member of the Remuneration and Nominations Committee.
**Abi Gray** Chair of the Remuneration and Nominations Committee
**84 Southern Housing Group**
## **Audit and Risk Committee report**
## **Statement from the Committee Chair – Janet Collier**
2020-21 has been a challenging year for the Group. In common with the country and the sector, we have seen exceptional external challenges with ongoing uncertainty over future UK economic conditions following Brexit, and the devastating impact of the coronavirus pandemic. In addition, we have had more local challenges to respond to following a governance downgrade from the Regulator of Social Housing.
At times such as these, the Committee’s work to provide the Board with assurance on the effectiveness of the risk management and internal control framework and processes is critical and helps to ensure that, as a business with social objectives, we can continue to invest in homes and communities, so people can thrive.
The Committee continues to oversee the financial reports prepared by management, and the audit and assurance work of our internal and external auditors, who themselves provide robust challenge and suggest areas of improvement within our internal control framework.
## **Introduction**
The Audit and Risk Committee’s members are independent directors. The Chair of the Committee is a member of the Group Board to facilitate the line of sight between the Board and the Committee. The Chair of the Committee is also Chair of the Group’s subsidiary, Crown Simmons, and recuses herself from Audit and Risk Committee meetings when matters relating to Crown Simmons are under consideration.
Across the Committee membership, there is a diverse range of experience in business, finance, auditing, risk and controls, with particular depth of experience in housing. The Committee is also able to draw on the expertise of key advisors and control functions, including the internal and external auditors.
The Committee provides oversight and advice to the Board on the matters listed in its terms of reference which focus on the integrity of financial reporting and the external audit process, and the maintenance of a sound system of internal control and risk management, including internal audit. The Committee reviewed its terms of reference and found them to be fit for purpose and in line with the requirements of the UK Corporate Governance Code. Some minor changes were made to the terms of reference during the year to ensure there was clarity of oversight between its remit and the functions of the Finance Committee. The Chair of the Committee reports to the Board on matters arising after each meeting.
The Committee did not require independent advice during the year but did consider the work of corporate advisors as part of risk and audit work. At each meeting, the Committee had the opportunity to meet with the internal and external auditors without management present.
## **Preparation of the financial statements and external financial reporting**
In considering the financial statements, the Committee discussed and considered in detail management’s analyses, the external auditor’s work, and conclusions on the main areas of judgement. Internal controls and risk management systems have been put in place to provide assurance over the preparation of the annual report and accounts. Information submitted for inclusion in the financial statements is attested by individuals with appropriate knowledge and experience.
The annual report and accounts are scrutinised throughout the process by relevant senior stakeholders. Subsequently, the Audit and Risk Committee, with the support of the Finance Committee, provides debate and challenge, before requesting board approval. Key controls in the process are subject to regular testing, the results of which are reported to the Committee.
The Audit and Risk Committee reviewed key audit and accounting matters and management judgements, with particular regard to property valuations, the prior year restatement relating to fixed assets, the accounting treatment applied to the merger with Crown Simmons and the going concern status and ongoing viability of the Group. Management judgements in respect of these matters were examined in detail and discussed with the Group’s external auditors. The Committee considered in detail the management letter provided by the auditors, as well as management’s responses.
Annual Report and Group Financial Statements 2020-21 **85**
**Audit and Risk Committee report** (continued)
## **The work of the Committee**
|**Area of focus**|**Committee action**|
|---|---|
|**Annual report and statutory**
**fnancial statements**|The Committee considered the annual report and fnancial statements at its meeting in July, following
joint engagement on the content between the Committee and the Finance Committee. The Committee|
||also reviewed evidence in support of the Group’s going concern and viability assessments and was
satisfed that it provided robust assurance of the ongoing viability of the Group.|
||The Committee recommended approval of the Group’s annual report and fnancial statements to the
Board, giving assurance that, taken as a whole, the annual report and fnancial statements were fair,|
||balanced and understandable, and provided the information needed to assess the Group’s position|
||and performance, business model and strategy.|
|**External audit**|The Committee considered the external audit plan for 2020-21 and monitored the implementation
of the internal control fndings highlighted by the external auditors in their report to the Committee|
||for the year ended 31 March 2020. They met in camera with the external auditors during the year.|
||The Committee considered the independence letter provided by the Group’s external auditors,
PricewaterhouseCoopers LLP, and was satisfed that the appropriate level of integrity, independence|
||and objectivity had been maintained. The auditors did not provide any non-audit or additional|
||services to the Group.|
||The auditors reached the end of a nine-year uninterrupted engagement with the Group in 2020-21|
||and the external audit service will be re-tendered for the 2021-22 year.|
||At their February meeting, the Committee approved the reappointment of Beever and Struthers as|
||external auditors for the audit of the 2020-21 year for the Crown Simmons entities within the Group.|
|**Internal audit**|The Committee approved the internal audit programme for the year, ensuring it conformed to the
Group’s key areas of risk. They actively monitored the programme’s ftness for purpose, modifying|
||it to ensure it remained focused on key areas. The Committee also ensured alignment between|
||the 2020-21 plan and the following year’s plan to extract maximum value. The Committee received|
||reports on the implementation of the internal audit programme at each of its meetings, reviewing|
||progress against audit recommendations by management.|
|**Risk management**|The Committee received reports on risk management and reviewed the Group’s top risk register|
||at each of its meetings, recommending any changes to the Board as appropriate.|
|**IDA action plan**|The Committee monitored the IDA action plan updates at its meetings in September, December and|
||February, reviewing the evidence provided by management to provide assurance to the Board that|
||progress was on target. They worked jointly with the Group Board on the closure of items on the|
||action plan. They received updates on the dialogue with the Regulator on their view of the Group’s|
||actions to improve the issues found by the IDA.|
|**Compliance with the UK**|The Committee reviewed the Group’s compliance with the UK Code at its July meeting and provided|
|**Corporate Governance Code**|assurance to the Group Board that the Group complied with all the provisions that applied to it.|
|**and regulatory standards**|They also considered compliance with regulatory standards at the same meeting and similarly|
||provided assurance to the Group Board on compliance.|
|**IT and data**|The Committee received regular reports on progress against key IT risks and audit recommendations,|
||including IT security, cyber security, data quality and systems. The Committee also monitored progress|
||in implementing data protection requirements and received update reports on any data breaches|
||together with information on any reports to the ICO and their outcomes.|
||The Committee considered data issues in regulatory returns and how to obtain assurance of the|
||robustness of the Group’s approach to its regulatory returns. An independent review of controls
and governance for Group returns was requested and an internal audit of the fnancial returns|
||has been scheduled for 2021-22 while a review of the Statistical Data Return was carried out|
||by external consultants.|
|**Fraud register**|The Committee received reports on any fraud activity experienced by the Group.|
|**Business continuity**|The Committee received reports on the effectiveness of the Group’s business continuity planning,|
||and how the plans had been revised and improved following the real-time experience of the pandemic.|
**86 Southern Housing Group**
## **Internal audit**
The Committee has overseen the conclusion of an internal audit plan. The Committee works closely with the internal auditors, who report directly to the chair of the Audit and Risk Committee. Throughout the year, the Committee carefully monitored the progress of the internal audit function. The Audit and Risk Committee approves the work of internal audit annually and specifically approves any changes to the audit plan, through regular quarterly updates. The scope of work takes account of the function’s own assessment of risks, the input of first and second line management, and the Audit and Risk Committee itself.
## **Key matter**
**To ensure that the Group’s internal audit programme considers and reflects the Group’s strategy and objectives**
**To ensure that a risk-based methodology, including risk horizon scanning, is used to devise the audit programme**
**To ensure that risks identified by the regulators and legalisation are identified**
**To identify and raise trends/risks arising from audit work**
The Committee recognises the need to have ongoing dialogue with management in between the quarterly meetings. The objective is to provide the Committee oversight of audit outcomes, and to give the members sufficient time to review and comment on audit reports. Consequently, the Committee has agreed to receive audit reports and any ad hoc changes to the audit programme outside of the formal meetings. To maintain line of sight, any decisions and/or discussions that occur outside of formal meetings are reported to the next Audit and Risk Committee meeting.
The internal audit plan and strategy for the year identified the key matters which are considered below.
## **Committee response**
The Committee agreed the audit programme following assurance that the Internal Audit and Assurance Manager had undertaken the necessary consultation in conjunction with the Risk Manager, directors and the internal auditors, Mazars, to ensure the Group’s strategy aligned with the programme.
The Committee mandated that the Social Housing White Paper should be considered and factored into the Group’s risk profiling, which assisted with the creation of the risk-based audit programme. The Committee agreed that the audit plan should reflect regulatory outcomes, legislative compliance, and the Consumer Standards.
The Committee supported the provision of regular oversight on trends emerging, including regular updates from the service areas which included plans to address the risks in the future.
**Janet Collier** Chair of the Audit and Risk Committee
Annual Report and Group Financial Statements 2020-21 **87**
**Statement of the Board’s responsibilities**
The Board is responsible for preparing the Annual Report and the Group Financial Statements in accordance with applicable law and regulations. The Co-operative and Community Benefit Societies Act 2014 and registered social housing legislation require the Board to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Private Registered Provider (PRP) and of the surplus or deficit for that period.
In preparing these financial statements, the Board is required to:
- Select suitable accounting policies and then apply them consistently
- Make judgements and estimates that are reasonable and prudent
- State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements
- Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the PRP will continue in business.
The Board is responsible for keeping proper accounting records that are sufficient to show and explain the PRP’s transactions and disclose its financial position with reasonable accuracy at any time. This is designed to enable the Board to ensure that the financial statements comply with the Co-operative and Community Benefit Societies Act 2014 and Regulations thereunder, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing in England 2019, issued by the Regulator of Social Housing.
The Board is also responsible for safeguarding the assets of the PRP and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Board is responsible for the maintenance and integrity of the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Southern Housing Group Limited confirms that the annual report has been prepared in accordance with the principles set out in paragraphs 4.6 and 4.7 of the 2018 Statement of Recommended Practice for registered social landlords.
The Regulator of Social Housing (the Regulator) carried out its routine in-depth assessment (IDA) of the Group during the 2019-20 year and published its regulatory judgement in April 2020. The Regulator assessed the Group’s governance rating as G2 and its rating for financial viability as V2. These ratings were previously G1 and V1 respectively.
A G2 rating meets the Regulator’s governance requirements but recognises that we need to improve some aspects of our governance arrangements to support continued compliance. A V2 rating meets the Regulator’s viability requirements, providing assurance that we have the financial capacity to deal with a reasonable range of adverse scenarios, but we need to manage material risks in order to ensure continued compliance. The Board approved an improvement plan to return to a G1 rating for governance at the earliest available opportunity. All items in this plan have been completed and improvements have been embedded into our business as usual processes.
The Board confirms that an assessment of the Group’s compliance with the Governance and Financial Viability Standard has been completed and certifies that the Group is compliant with this Standard. The board members who served during the year are listed and attendance at meetings is recorded on pages 75 to 79.
## **Statement of internal controls**
The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. The system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives. It provides reasonable, and not absolute, assurance against material misstatement or loss.
The Group operates ongoing processes for identifying, evaluating and managing the significant risks that it faces. They have been in place for the year to 31 March 2021 and up to the date of the approval of the Annual Report and the Group Financial Statements. The Board and Audit and Risk Committee review processes at least quarterly.
## **Main policies in place to provide effective internal control Risk assessment**
The Group’s objectives are established within the context of the Group’s Corporate Plan. There is a process of cascading these objectives throughout the Group to each operational team and to individual staff member targets. Assessment of resultant risk is mapped for each area of business activity. The Group’s risk management strategy includes requirements for formal risk assessments to be presented to the Board for discussion and approval. The Audit and Risk Committee fulfils this function.
## **Control environment**
Authority, responsibility and accountability are set out in the following ways:
- Standing orders and delegated authorities
- Regular reporting to the appropriate committee on key business objectives, targets and outcomes
- Clearly defined management responsibilities for the
- identification, evaluation and control of significant risks
- Policies and procedures in all key areas
- Codes of conduct for Board and Committee members, and staff
- Staff job descriptions and supervisory procedures.
**88 Southern Housing Group**
## **Information**
There is a timely system for reporting progress in the Group, at many levels. The Boards and their sub-committees receive regular and extensive reports on all key areas of performance.
## **Monitoring**
The Group has a comprehensive internal audit programme undertaken by Mazars LLP, chartered accountants, who report to the Audit and Risk Committee. They also meet regularly and independently with the Chair of the Audit and Risk Committee.
The internal audit programme is designed to review key areas of risk for the Group. Each audit assignment is sponsored by the relevant Executive Director who approves the scope of the work and takes responsibility for ensuring recommendations are acted upon. Group-wide progress on completing work on recommendations is monitored by the Internal Audit and Assurance Team. Both Mazars LLP and the Group’s internal audit team report to each meeting of the Audit and Risk Committee on their recent and prospective activity.
The risk management process incorporates reviews of high-level strategic risks across the Group, including the identification of newly emerging risks. The external audit, internal audit and risk management activities incorporate follow-up reporting on actions identified for improving the Group’s control environment.
## **Statement on the annual report**
Each individual who is a director at the date of approval of this report confirms that they consider the annual report and accounts as a whole to be fair, balanced and understandable, and that they provide the information necessary for stakeholders to assess the Group’s performance, business model and strategy.
## **Statement as to disclosure to auditors**
So far as the directors are aware, there is no relevant audit information of which the Group’s auditors are unaware. They have taken all the steps they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.
**Arthur Merchant** Chair of the Group Board
For and on behalf of the Board
## **Review of effectiveness**
The Board has reviewed the effectiveness of the Group’s internal controls through the work of the Audit and Risk Committee, which regularly reports to the Board. In addition, the Chief Executive has submitted to the Board a detailed report on the operation of internal controls during the period under review and up to the date of approval of this report.
The Board confirms that no weaknesses were found in the internal controls for the year ended 31 March 2021 that might otherwise have resulted in material losses, contingencies or uncertainties which require disclosure in the financial statements.
## **Independent auditors**
A resolution is to be proposed at the annual general meeting for the position of Group’s independent auditor to be retendered for the forthcoming year.
Annual Report and Group Financial Statements 2020-21 **89**
90
SouthEtn Housing Group
# **Financial statements**
Independent auditors’ report **92** Consolidated and Association Statements of Comprehensive Income **98** Consolidated and Association Statements of Financial Position **99** Consolidated and Association Statements of Changes in Reserves **100** Consolidated Statement of Cash Flows **101** Notes to the financial statements **102**
Annual Report and Group Financial Statements 2020-21 **91**
**Independent auditors’ report**
Independent auditors’ report to the members of Southern Housing Group Limited
## **Independence**
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
We have provided no non-audit services to the association or its controlled undertakings in the period under audit.
## **Our audit approach**
## Report on the audit of the financial statements
## **Opinion**
In our opinion, Southern Housing Group Limited’s group financial statements and association financial statements (the “financial statements”):
- give a true and fair view of the state of the group’s and of the association’s affairs as at 31 March 2021 and of the group’s and association’s surplus and the group’s cash flows for the year then ended;
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and
- have been prepared in accordance with the requirements of the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for private registered providers of social housing 2019.
We have audited the financial statements, included within the Annual Report and Group Financial Statements 2020/21 (the “Annual Report”), which comprise: the consolidated and association Statements of financial position as at 31 March 2021; the consolidated and association Statements of comprehensive income, the consolidated and association Statements of changes in reserves and the consolidated Statement of cash flows for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
## **Basis for opinion**
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
## **Overview**
## **Audit scope**
- The group operates in England. It comprises nine trading entities and two joint venture entities.
- We conducted a full scope audit of six trading entities, while the remaining three trading entities were not significant from the perspective of the group.
- We engaged a component team to conduct a full scope audit of one joint venture entity, while the other joint venture entity was not significant from the perspective of the group.
- These audit procedures covered 98% of group turnover and 98% of group total assets.
## **Key audit matters**
- Valuation of investment properties (group and association)
- Consideration of COVID-19 (group and association)
## **Materiality**
- Overall group materiality: £2.1 million (2020: £2.4 million) based on 1% of turnover.
- Overall association materiality: £1.9 million (2020: £1.8 million) based on 1% of turnover.
- Performance materiality: £1.6 million (group) and £1.4 million (association).
## **The scope of our audit**
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
## **Key audit matters**
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
**92 Southern Housing Group**
The key audit matters below are consistent with last year.
## **Key audit matter**
## **Valuation of investment properties (group and association)**
See notes 1 and 11 to the financial statements for the group’s and association’s disclosures of the related accounting policies, judgements and estimates relating to the valuation of investment properties.
Certain group properties are held for long-term investment or are rented at market rents. At 31 March 2021, these were valued at £162.1 million. These are initially recognised at cost (including purchase costs and directly attributable expenditure), and subsequently measured at fair value with any increases or decreases in fair value recognised within the surplus for the year. The group engages independent valuers with relevant qualifications to value their investment property portfolio.
Valuing investment properties is complex, judgmental and requires the involvement of specialists. Investment properties are material to the group and their value can vary significantly due to the sensitivity of the calculations to input assumptions such as expected yields/discount rates and market growth assumptions, especially in the current COVID-19 environment. In addition, there are limited comparable transactions which increases the level of judgement in respect of the relevant yields. This further heightens the risk of material misstatements due to judgements in assumptions used.
## **How our audit addressed the key audit matter**
We engaged our internal valuation experts (RICS qualified) to assist us in our audit of this matter.
We assessed the external valuers’ qualifications and expertise and noted they have the necessary skills and relevant experience to perform these valuations.
We verified on a sample basis, the accuracy of the underlying lease and property data used by the external valuers in their valuation by tracing the data back to the relevant supporting documents.
We read the external valuation reports for the residential, commercial and properties under development portfolios. With the assistance of our internal valuation experts, we confirmed that the valuation approach for each portfolio was in accordance with RICS standards and suitable for use in determining the final fair values for the purpose of the financial statements.
With the assistance of our internal valuation experts, we challenged the valuation process, the key assumptions, and the rationale behind the more significant valuation movements during the year. We did not identify any unreasonable special assumptions or unusual caveats or disregards. We are satisfied that the valuations of the investment properties are within an acceptable range and have been performed on an appropriate basis for inclusion in the financial statements.
We have reviewed the disclosures included in note 1 and note 11 of the financial statements, including sensitivity analysis, and consider these are adequate.
## **Consideration of COVID-19 (group and association)**
The COVID-19 pandemic has had a significant impact on the UK economy with consequences to the judgements and estimates made by the group.
Based on its experience over the past year, management has assessed the completeness of accounting considerations across the group. While management have adequately considered the ongoing impact of the COVID-19 pandemic on its accounting estimates in preparing the group’s financial statements, they have not identified any material financial risks at the year-end arising due to the pandemic.
Management has considered its short-term and long-term forecasts as part of the group’s going concern statement and viability assessment. This includes applying stress tests to reflect the potential for heightened financial risk stemming from the effects of the COVID-19 pandemic by modelling possible downside scenarios to its base case financial plan. Having considered these scenarios, together with an assessment of planned and possible mitigating actions, the Directors have concluded that the group remains a going concern, and that there is no material uncertainty in respect of this conclusion.
We evaluated management’s assessment of accounting estimates within the financial statements which could be impacted by the challenging economic environment resulting from COVID-19. We satisfied ourselves that management’s measurement of such estimates was acceptable. We also considered the appropriateness of management’s disclosures in the Annual Report of the impact of the current environment and the increased uncertainty on its accounting estimates and found these to be adequate.
With respect to the Directors’ going concern statement and viability assessment, we evaluated management’s base case and downside scenarios, challenging its key assumptions together with assessing the group’s available facilities. Our conclusion in respect of going concern, and our consideration of the Directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency or liquidity of the group, are set out separately in this report.
Management has included its going concern statement and described its viability assessment in the Annual Report.
Annual Report and Group Financial Statements 2020-21 **93**
**Independent auditors’ report** (continued)
## **How we tailored the audit scope**
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group and the association, the accounting processes and controls, and the industry in which they operate.
The group operates in England. It comprises nine trading entities and two joint venture entities.
Of the above, six trading entities (including the association) and one joint venture entity are considered to be significant components of the group. We conducted full scope audits of the six trading entities. We instructed component auditors for one joint venture entity. The remaining entities were not material from the perspective of the group.
Our audit procedures accounted for 98% of the group’s turnover and 98% of the group’s total assets.
## **Materiality**
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
|**Overall**
**materiality**
**How we**
**determined it**|**Financial statements**
**–group**
£2.1 million
(2020: £2.4 million).
1% of turnover|**Financial statements**
**– association**
£1.9 million
(2020: £1.8 million).
1% of turnover|
|---|---|---|
|**Rationale for**
**benchmark**|This is a generally
accepted measure|This is a generally
accepted measure|
|**applied**|applied when auditing
organisations with|applied when auditing
organisations with|
||social objectives,|social objectives,|
||to calculate overall|to calculate overall|
||materiality.|materiality.|
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between £7,000 and £1,896,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £1.6 million for the group financial statements and £1.4 million for the association financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £106,200 (group audit) (2020: £118,000) and £94,800 (association audit) (2020: £90,700) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
## **Conclusions relating to going concern**
Our evaluation of the directors’ assessment of the group’s and the association’s ability to continue to adopt the going concern basis of accounting included:
- detailed discussions with management to understand their approach to assessing going concern and viability both prior to and after the year-end;
- an assessment of management’s base case and downside scenarios, challenging the key assumptions;
- considering the group’s available financing, including related covenants, and maturity profile to assess liquidity through the assessment period;
- testing the mathematical integrity of the forecasts and the models and reconciled these to Board-approved budgets;
- reviewing the adequacy and sensitivity of the key assumptions considered in the downside scenario; and
- assessing the reasonableness of management’s planned or potential mitigating actions where relevant.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and the association’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the association’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
**94 Southern Housing Group**
## **Reporting on other information**
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
## **Corporate governance statement**
ISAs (UK) require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the association’s compliance with the provisions of the UK Corporate Governance Code, which the Listing Rules of the Financial Conduct Authority specify for review by auditors of premium listed companies. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement, included within the Governance report is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
- The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
- The directors’ explanation as to their assessment of the group’s and association’s prospects, the period this assessment covers and why the period is appropriate; and
- The directors’ statement as to whether they have a reasonable expectation that the association will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the group and the association and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
- The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the group’s and association’s position, performance, business model and strategy;
- The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
- The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the association’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
- The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated;
- The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the group’s and association’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
Annual Report and Group Financial Statements 2020-21 **95**
**Independent auditors’ report** (continued)
## **Responsibilities for the financial statements and the audit**
## **Responsibilities of the directors for the financial statements**
As explained more fully in the Statement of the Board’s responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the association’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the association or to cease operations, or have no realistic alternative but to do so.
## **Auditors’ responsibilities for the audit**
## **of the financial statements**
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to the Regulator of Social Housing’s regulatory framework, and we considered the extent to which non- compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for private registered providers of social housing 2019. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to inappropriate
journal entries to increase the reported operating surplus, and management bias in accounting estimates. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included: – Discussions with management and members of the Audit and Risk Committee, including consideration of known or suspected instances of non-compliance with laws and regulations (in particular, considering the results of the Regulator of Social Housing’s most recent In-Depth Assessment) and fraud;
- Evaluation of management’s controls designed to prevent and detect irregularities;
- Challenging judgements and assumptions made by management in their key accounting judgements and estimation uncertainty, in particular in relation to the valuation of investment properties (see the related key audit matter); and
- Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations focusing on journals impacting: rental income, capitalisation of costs and property sales.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of noncompliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
## **Use of this report**
This report, including the opinions, has been prepared for and only for the parent society’s members as a body in accordance with Section 87 (2) and Section 98 (7) of the Co-operative and Community Benefit Societies Act 2014 and Section 128 of the Housing and Regeneration Act 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
**96 Southern Housing Group**
## Other required reporting
## **Co-operative and Community Benefit Societies Act 2014 exception reporting**
## Under the Co-operative and Community Benefit Societies Act
- 2014 we are required to report to you if, in our opinion:
- a satisfactory system of control over transactions has not been maintained; or
- we have not received all the information and explanations we require for our audit; or
- proper accounting records have not been kept by the parent society; or
- the parent financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
## **Appointment**
Following the recommendation of the Audit and Risk Committee, we were appointed by the members on 9 July 2012 to audit the financial statements for the year ended 31 March 2013 and subsequent financial periods. The period of total uninterrupted engagement is 9 years, covering the years ended 31 March 2013 to 31 March 2021.
The engagement partner on the audit resulting in this independent auditors’ report is Sotiris Kroustis.
**PricewaterhouseCoopers LLP** Chartered Accountants and Statutory Auditors London
20 July 2021
Annual Report and Group Financial Statements 2020-21 **97**
**Consolidated and Association Statements of Comprehensive Income**
For the year ended 31 March 2021
||||Restated||Restated|
|---|---|---|---|---|---|
|||**Group**|Group|**Association**|Association|
|||**2021**|2020|**2021**|2020|
||Note|**£000s**|£000s|**£000s**|£000s|
|Turnover|2|**212,182**|236,846|**189,643**|181,415|
|Cost of sales|2|**(25,588)**|(47,302)|**(9,961)**|(5,003)|
|**Gross proft**||**186,594**|189,544|**179,682**|176,412|
|Operating costs|2|**(148,263)**|(145,552)|**(143,731)**|(146,958)|
|Gain/(loss) on revaluation of investment properties|2|**6,156**|(5,865)|**5,602**|(5,650)|
|Gain on disposal of fxed assets|5|**16,539**|24,046|**16,070**|23,776|
|**Operating surplus**||**61,026**|62,173|**57,623**|47,580|
|Interest receivable and similar income|6|**394**|1,190|**5,225**|4,889|
|Interest payable and similar charges|7|**(38,414)**|(39,595)|**(41,989)**|(43,620)|
|Share of (loss)/surplus in joint ventures||**(155)**|24|**–**|–|
|Gain on acquisition of Crown Simmons|31|**58,844**|–|**–**|–|
|Gift aid received||**–**|–|**13,659**|19,961|
|**Surplus before tax**|8|**81,695**|23,792|**34,518**|28,810|
|Taxation|9|**(68)**|(295)|**–**|–|
|**Surplus for theyear**||**81,627**|23,497|**34,518**|28,810|
|**Other comprehensive (expense)/income**||||||
|Actuarial(loss)/gain in respect ofpension schemes|25|**(4,534)**|183|**(4,534)**|183|
|**Total other comprehensive(expense)/income**||**(4,534)**|183|**(4,534)**|183|
|**Total comprehensive income for theyear**||**77,093**|23,680|**29,984**|28,993|
|**Total comprehensive income attributable**||||||
|**to the Association**||**77,248**|23,656|**29,984**|28,993|
Restated balances are in respect of housing properties, details of which are presented in note 32.
All results for the current and prior years are attributable to continuing operations. The notes on pages 102 to 133 form part of these financial statements.
**98 Southern Housing Group**
**Consolidated and Association Statements of Financial Position**
As at 31 March 2021
||Note
**Group**
**2021**
**£000s**|Restated
Group
2020
£000s|**Association**
**2021**
**£000s**|Restated
Association
2020
£000s|
|---|---|---|---|---|
|**Fixed assets**|||||
|Property, plant and equipment|10
**2,214,586**|2,102,654|**1,978,226**|1,955,245|
|Investment properties|11
**162,148**|143,299|**131,308**|125,315|
|Investment in social HomeBuy|12
**7,101**|7,267|**7,101**|7,267|
|Unlisted investments|13
**8,058**|7,888|**7,887**|7,888|
|Investment in connected entities|14
**2,146**|1,968|**5,690**|3,708|
|Investment injoint ventures
**Current assets**
Stock
Trade and other debtors|15
**1,755**
**2,395,794**
16
**114,439**
17
**17,618**|1,910
2,264,986
109,709
25,876|**1,294**
**2,131,506**
**23,935**
**250,703**|1,294
2,100,717
17,586
213,112|
|Cash and cash equivalents|**35,771**|58,934|**24,996**|49,999|
|Creditors: amounts fallingdue within oneyear|**167,828**
18
**(118,269)**|194,519
(112,979)|**299,634**
**(105,299)**|280,697
(104,833)|
|**Net current assets**|**49,559**|81,540|**194,335**|175,864|
|**Total assets less current liabilities**|**2,445,353**|2,346,526|**2,325,841**|2,276,581|
|Creditors: amounts falling due after more than one year
Deferred tax
Provisions for liabilities and charges
Post employment benefts
**Total net assets**|19
**(1,712,467)**
9
**(710)**
21
**(7,492)**
25
**(13,206)**
**711,478**|(1,699,996)
–
(3,500)
(8,574)
634,456|**(1,697,937)**
**–**
**(6,712)**
**(13,206)**
**607,986**|(1,687,434)
–
(2,500)
(8,574)
578,073|
|**Reserves**|||||
|Called up share capital|22
**–**|–|**–**|–|
|Retained equity|**711,119**|634,026|**607,627**|577,643|
|General reserve|**359**|430|**359**|430|
|Total reserves|**711,478**|634,456|**607,986**|578,073|
Restated balances are in respect of housing properties, details of which are presented in note 32.
Retained equity includes the net assets of the Samuel Lewis Foundation, an endowment fund. See note 29 for further information on its net assets.
The financial statements on pages 98 to 133 were authorised for issue by the Board of Directors on 19 July 2021 and signed on its behalf by:
**Arthur Merchant Janet Collier Noreen Adams** Chair Board Member Company Secretary
**Southern Housing Group Limited is incorporated under the Co-operative and Community Benefit Societies Act 2014 (Registered Number IP31055R)**
Annual Report and Group Financial Statements 2020-21 **99**
## **Consolidated and Association Statements of Changes in Reserves**
For the year ended 31 March 2021
||Retained equity|General reserve|**Total reserves**|
|---|---|---|---|
|**Group**|£000s|£000s|**£000s**|
|Reserves at 1 April 2019 (as presented)|620,030|430|**620,460**|
|Restatement (see note 32)|(9,684)|–|**(9,684)**|
|Reserves at 1 April 2019 (restated)|610,346|430|**610,776**|
|Surplus for the year (restated)|23,497|–|**23,497**|
|Actuarialgain onpension schemes|183|–|**183**|
|**Reserves at 31 March 2020 (restated)**|**634,026**|**430**|**634,456**|
|Surplus for the year|81,627|–|**81,627**|
|Actuarial loss on pension schemes|(4,534)|–|**(4,534)**|
|Total other comprehensive expense for theyear|–|(71)|**(71)**|
|**Reserves at 31 March 2021**|**711,119**|**359**|**711,478**|
|||||
|**Association**|Retained equity
£000s|General reserve
£000s|**Total reserves**
**£000s**|
|Reserves at 1 April 2019 (as presented)|558,334|430|**558,764**|
|Restatement (see note 32)|(9,684)|–|**(9,684)**|
|Reserves at 1 April 2019 (restated)|548,650|430|**549,080**|
|Surplus for the year (restated)|28,810|–|**28,810**|
|Actuarialgain onpension schemes|183|–|**183**|
|**Reserves at 31 March 2020 (restated)**|**577,643**|**430**|**578,073**|
|Surplus for the year|34,518|–|**34,518**|
|Actuarial loss on pension schemes|(4,534)|–|**(4,534)**|
|Total other comprehensive expense for theyear|–|(71)|**(71)**|
|**Reserves at 31 March 2021**|**607,627**|**359**|**607,986**|
Restated balances are in respect of housing properties, details of which are presented in note 32.
The general reserve records funds that have been given to the Group for use on some estates.
Retained equity includes the net assets of the Samuel Lewis Foundation, an endowment fund. See note 29 for further information on its net assets.
**100 Southern Housing Group**
**Consolidated Statement of Cash Flows**
For the year ended 31 March 2021
||Note
**Group**
**2021**
**£000s**|Restated
Group
2020
£000s|
|---|---|---|
|**Cash fow from operating activities**|||
|**Surplus before tax**|**81,695**|23,792|
|Share of loss/(surplus) in joint ventures|**155**|(24)|
|Net interest and fnancing costs|**38,020**|38,405|
|Gain on acquisition of Crown Simmons|**(58,844)**|–|
|**Operating surplus**|**61,026**|62,173|
|Adjustments for:
Depreciation
Gain on disposal of fxed assets
(Gain)/loss on revaluation of investment properties
(Reversal of impairment)/impairment|10
**29,488**
**(16,539)**
**(6,156)**
10
**(300)**|26,494
(24,046)
5,865
2,800|
|Government grants utilised in the year|**(9,611)**|(9,846)|
|Decrease/(increase) in stock and Homefex property disposal|**3,629**|(21,760)|
|Decrease/(increase) in trade and other debtors|**8,461**|(10,892)|
|Increase in trade and other creditors|**10,206**|5,957|
|Increase in provisions|**3,160**|2,701|
|Corporation tax
**Net cashgenerated from operating activities**
**Cash fow from investing activities**
Purchase of property, plant and equipment
Purchase of investment property
Proceeds from disposal of property, plant and equipment|**(394)**
**82,970**
10
**(95,774)**
**(19,259)**
**33,931**|–
39,446
(197,287)
(40,721)
51,909|
|Distributions received from joint ventures|**–**|328|
|Loan to joint venture|**(178)**|(178)|
|Interest received|**394**|862|
|Government grants received|**14,500**|46,565|
|Proceeds from sale of social HomeBuy investments
Cash arisingfrom acquisition of Crown Simmons Housing
**Net cash used in investing activities**
**Cash fow from fnancing activities**
Interest paid
Loan repayments|**464**
**7,612**
**(58,310)**
**(44,011)**
**(42,812)**|423
–
(138,099)
(42,401)
(59,317)|
|New secured loans|**39,000**|207,341|
|**Net cash(used in)/generated from fnancing activities**|**(47,823)**|105,623|
|Net (decrease)/increase in cash and cash equivalents|**(23,163)**|6,970|
|Cash and cash equivalents at the beginningof theyear
**Cash and cash equivalents at the end of theyear**|**58,934**
**35,771**|51,964
58,934|
|**Group reconciliation of net debt**|Group
2020
£000s|Group
cash fow and
non-cash items*
£000s|**Group**
**2021**
**£000s**|
|---|---|---|---|
|Cash and cash equivalents|58,934|(23,163)|**35,771**|
|Housingloans and listed bonds|(978,432)|(8,079)|**(986,511)**|
|**Net debt**|(919,498)|(31,242)|**(950,740)**|
Restated balances are in respect of housing properties, details of which are presented in note 32.
- Included are non-cash items which increase net debt by £1,854k. These represent effective interest rate adjustments, which include debt issue costs, and movements on accrued interest.
At 31 March 2021, restricted cash comprising balances on bank accounts held on trust for those who own a share of their property totalled £10,869k (2020: £10,144k). Cash also includes a restricted balance of £202k (2020: £202k) where a charge is held as security to cover future development costs on a particular scheme.
A further £15,285k (2020: £15,285k) restricted balance is held relating to the Samuel Lewis Foundation, a permanent endowment.
Annual Report and Group Financial Statements 2020-21 **101**
**Notes to the financial statements**
For the year ended 31 March 2021
## **1. Principal accounting policies General information and statement of compliance**
## Basis of preparation
The financial statements have been prepared in accordance with and are compliant with applicable Generally Accepted Accounting Standards in the United Kingdom including Financial Reporting Standard 102 (FRS 102), the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the accounting direction for private registered providers of social housing 2019, issued by the Regulator of Social Housing. They have been prepared on the historical cost basis (as modified by the revaluation of investment properties and financial instruments).
The accounting policies have been consistently applied. The Association and the Group are public benefit entities registered in England. The accounting policies are set out below or in the relevant note disclosures relating to each balance or transaction.
## Segmental reporting
For the purpose of segmental reporting, the chief operating decision maker (‘CODM’) is considered to be the Executive Management Team (‘EMT’). In line with the segments reported to the CODM, the presentation of these financial statements and accompanying notes reflect the Group’s management and internal reporting. The information reviewed within the management accounts to assess performance and make strategic decisions is consistent with and closely aligned to these financial statements. Segmental reporting is presented in note 2 to the financial statements where information about income and expenditure attributable to the material operating segments are presented on the basis of the tenure type of the housing assets held by the Group. This is appropriate on the basis of the similarity of the services provided, the nature of the associated risks, and the nature of the regulatory environment in which the Group operates.
Assets and liabilities are not reported by operating segment or tenure, other than housing properties which are split by tenure type and are shown in note 10.
## Basis of consolidation
The consolidated financial statements incorporate the financial statements of Southern Housing Group Limited (the Association), Southern Home Ownership Limited (SHOL), Southern Space Limited (SSL), Southern Development Services Limited (SDSL), Southern Housing Construction Limited (SHCL), Spruce Homes Limited, Rosemary Simmons Memorial Housing Association Limited, Hewitt Homes and Fellowship Houses Trust and are consolidated in accordance with FRS 102 and the Co-operative and Community Benefit Societies Act 2014.
Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All intercompany transactions and balances between Group entities are eliminated in full on consolidation.
The joint venture investments in Triathlon Homes LLP and Affinity (Reading) Holdings Limited are accounted for using the equity accounting method in these consolidated financial statements. Affinity Housing Services (Reading) is accounted for as a jointly controlled operation.
## Business combination
Business combinations are accounted for by applying the purchase method. The cost of a business combination is the fair value of the consideration given, liabilities incurred or assumed plus the costs directly attributable to the business combination. On acquisition of a business, fair values are attributed to the identifiable assets, liabilities and contingent liabilities unless the fair value cannot be measured reliably. Where the fair value of contingent liabilities cannot be reliably measured they are disclosed on the same basis as other contingent liabilities. Where the business combination is in substance a gift, then the difference between the fair value of net assets acquired and the consideration paid is recognised as a gain through profit or loss.
On 1 April 2020 Rosemary Simmons Memorial Housing Association Limited trading as Crown Simmons Housing became a subsidiary of Southern Housing Group Limited. Purchase accounting has been applied to the business combination and a fair value assessment was completed for the assets, liabilities and activities of Crown Simmons Housing as at 1 April 2020, as required by section 19 of FRS 102. The business combination was in substance a gift since there was no consideration paid to acquire the net assets of Crown Simmons Housing.
## Going concern
The Group’s business activities, its current financial position and factors that are likely to affect its future development are set out within the Strategic Review. The Board’s assessment of going concern is focused on the Group’s liquidity and its compliance with loan covenants. The review period is 18 months from the signing of the financial statements.
The Group maintains its rigorous approach to financial planning, including the preparation of detailed budgets and forecasts for the next financial year. The Group’s budget is approved by the Board and forms the first year of the 30-year business plan (the ‘long-term financial plan’) which sets out the long-term objectives of the Group.
The Board has considered the ongoing impact of Covid-19 on its short-term forecasts, applying stress tests to the early years of the long-term financial plan that reflect the potential for heightened financial risk stemming from the effects of the pandemic. The Board considers these tests to represent a severe yet plausible view of the risks that may impact the Group. The tests consider the impact of adverse movements in macroeconomic indicators, as well as sharp reductions in development sales income and significant above-inflationary increases in costs. Tenant rent arrears are presumed to almost double in the period under review with a conservative assumption on eventual recovery also modelled. The Group is able to withstand these stresses while remaining fully compliant with its loan covenants and without employing any mitigating actions.
In line with its treasury management policy, the Group continues to maintain sufficient resources to cover at least the next 18 months’ committed cash flows, excluding sales receipts. This position is calculated net of any restricted cash. The Group’s detailed liquidity position is set out on pages 55 to 56 and at the year-end undrawn facilities and cash investments totalled £426.5m with sufficient headroom forecast against the Group’s liquidity policy.
No material uncertainties related to events or conditions that may cause significant doubt about the ability of the Group to continue as a going concern have been identified. On this basis, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months after the date on which the report and financial statements are signed. Accordingly, the directors continue to adopt the going concern basis in preparing the Group’s consolidated financial statements.
**102 Southern Housing Group**
## **1. Principal accounting policies (continued)**
## Cash and cash equivalents
Cash and cash equivalents are cash and short term, highly liquid investments that are convertible for use as cash at less than three months’ notice with minimal risk to the principal sum. Cash balances also include restricted cash held on behalf of the Group’s leaseholders, for which there is an associated creditor balance held (see note 18) and any cash relating to our permanent endowment which is only available for specific uses. The Association has taken advantage of the exemption under FRS 102 and has not prepared a cash flow statement.
## Gift aid
Gift aid income is recognised in the statement of comprehensive income by the Association and as a distribution in the subsidiary making the gift aid payment when the intended gift has been confirmed. It is only provided for where a legal obligation exists. Income and distribution are eliminated on consolidation where the gift is from a Group company.
## VAT
A large proportion of the Group’s income comprises rental income which is exempt for VAT purposes and gives rise to a partial exemption calculation. Expenditure is therefore shown inclusive of VAT. Recoverable VAT arising from partially exempt activities is credited to the statement of comprehensive income.
When considering property assets for impairment, units are grouped together as cash generating units, by block and tenure type where the assets are in use and at a scheme level for assets under construction. As these assets are held for service potential, judgement is required in determining the appropriate method for calculating the value in use. No impairment requirement was identified.
## _Gift aid_
Management has made a judgement that it is probable that gift aid payments will be made to the parent within 9 months of the year end by the subsidiary entities where sufficient funds are available for the year ended 31 March 2021. In accordance with FRS 102 the tax provision is assessed on the basis that gift aid payments are probable.
Therefore, the corporation tax impact of probable gift aid payments has been considered in the calculation of the tax provision for the period.
## _Building safety provisions_
Building safety provisions are recognised when it is probable that the Group will have to incur costs to satisfy a constructive or legal obligation. Determination of whether a constructive or legal obligation for a specific property has arisen is a matter of judgment and management assess this based on information available at the year-end.
## Restatement
During the year, the Association identified an error, following an exercise to review historic records, relating to incorrect depreciation of housing property assets. The Association has restated the comparative figures in these financial statements, being the earliest prior period presented to which these errors relate, to give effect to the adjustments necessary to correct the identified error. See note 32 for details.
Key accounting judgements and estimation uncertainty In preparing the financial statements, the Group is required to make certain estimates, judgements and assumptions. Estimates and assumptions will, by definition, seldom equal the related actual results. These are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable based on the information available.
The critical judgements made in these financial statements are:
## Key sources of estimation uncertainty:
## _Property assets_
The proportion of shared ownership properties sold as the first tranche varies from property to property based on the percentage purchased by the shared owner. The first tranche proportion of unsold and under construction properties is estimated based on recent sales trends observed over the past year and expected selling percentage from the remaining unsold stock. The current estimate of the proportion that will be sold as first tranche is 43%. This percentage has increased from 35% in the previous year and can vary according to different geographical and economic factors. An increase of 1% in the expected selling percentage would result in an increase of £1,458k in the value of unsold assets held in stock and a corresponding decrease in shared ownership housing properties. Stock is held at the lower of cost or net realisable value. This requires management to estimate the expected selling price of properties under construction as well as the cost to complete construction. The carrying value of stock is disclosed in note 16.
## _Property assets_
See notes 10, 11 and 16 for the accounting policies. Management have applied judgement in determining whether assets are recognised as property, plant and equipment, investment properties or stock based on their intended usage. For mixed tenure developments the appropriate share of costs for individual units constructed is allocated on a pro-rata area basis, in line with the initial appraisal. This is then revised once the final tenure mix has been confirmed.
It is Group policy to ensure resident shared owners maintain the property in a continuous state of sound repair and the Group considers that any depreciation calculation based on the property’s current value would be insignificant, due to the large residual value and long economic lives. Therefore, shared ownership properties are not depreciated.
The fair value of investment properties is determined annually by professional external valuers. They use certain key assumptions to assess the values which can vary due to the sensitivity of the inputs such as discount rates, yields and market conditions. See note 11 for further detail.
## _Post employment benefits_
Estimation of pension assets and liabilities depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates, expected returns on pension fund assets and guaranteed minimum payment (GMP) equalisation. The Group uses qualified actuaries to value its pension assets and liabilities. See note 25 for further detail.
Annual Report and Group Financial Statements 2020-21 **103**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **2. Turnover**
## **Turnover and operating surplus**
Operating surplus includes gains and losses on the sale of fixed assets and revaluation gains and losses on investments, as these are considered to be part of the Group’s operating activities. Gift aid receipts are not included within the operating surplus as the amount paid is considered annually and therefore is not an operating item.
## **Property sales income**
Receipts from the sale of the first tranche of shared ownership properties and proceeds of open market sales are recognised within turnover on legal completion. The sale of subsequent tranches (staircasing) of shared ownership properties and the sale of housing properties are recorded net of carrying value as a gain or loss on disposal of fixed assets.
## **Grants**
## **Rent receivable**
Rental income from social housing and private rental properties owned by the Group is recognised, net of void losses, on a straight-line basis over the lease term.
## **Service charge income**
Service charge income is recognised on an accruals basis as it falls due. The Group operates both fixed and variable service charges on a scheme-by-scheme basis in full consultation with residents. The service charges on all schemes are set on the basis of budgeted spend. Where variable service charges are used the budget will include an allowance for the surplus or deficit from prior years, with a surplus being returned to residents in the form of a reduced charge in the following year and a deficit being recovered via a higher service charge or by alternative methods if the contract allows.
## **Management fees**
Management fees receivable (excluding VAT) for services provided to other entities are recorded when they fall due. Fees are charged to the Group’s subsidiaries for management and support services and are apportioned as a percentage of turnover. Intra group fees receivable and payable are eliminated on consolidation.
Revenue grants are credited to the statement of comprehensive income in the same period as the expenditure to which they relate and the performance conditions are met. The cumulative grant amortised is disclosed as part of the contingent liabilities until the property it funds is disposed of or ceases to be used for social housing purposes.
Social Housing Grant is the capital grant provided by Homes England (formerly the Homes and Communities Agency), the Greater London Authority or other Government agency to wholly or partially fund Registered Providers when developing social housing. The grant is carried as deferred income in the balance sheet and amortised to the statement of comprehensive income through turnover, over the life of the structure of the properties to which it relates when they are ready to let. Social Housing Grant becomes recyclable at the point the related property is sold and is transferred to a recycled capital grant fund until it is reinvested in a replacement property. If there is no requirement to recycle or repay the grant on disposal of the assets any unamortised grant remaining within creditors is released and recognised as income in the statement of comprehensive income. Grants which cannot be recycled are returned to the funder.
## **Support services**
Support service income for provision of extra care for residents with specific needs is recognised on an accruals basis as it falls due.
## **Commercial income**
Income from the letting of commercial properties is recognised on a straight-line basis over the lease term. Lease incentives are amortised over the life of the lease.
**104 Southern Housing Group**
## **2. Turnover and operating surplus**
|**2. Turnover and operating surplus**|||||||||
|---|---|---|---|---|---|---|---|---|
|||**2021**|**2021**|**2021**||Restated
2020|Restated
2020|Restated
2020|
||**2021**|**Cost of**|**Operating**|**Operating**|2020|Cost of|Operating|Operating|
||**Turnover**|**sales**|**costs**|**surplus**|Turnover|sales|costs|surplus|
|**Group**|**£000s**|**£000s**|**£000s**|**£000s**|£000s|£000s|£000s|£000s|
|**Social housing lettings**|**168,400**|**–**|**(138,168)**|**30,232**|162,917|–|(136,540)|26,377|
|**Other social housing activities**
Charges for support services|**5,589**|**–**|**(5,596)**|**(7)**|4,755|–|(5,296)|(541)|
|First tranche low-cost home
ownership sales
Impairment reversal/(charge)*
Other
**Non-social housing activities**
Commercial income/(expenses)
Private rental lettings|**18,875**
**–**
**1,476**
**2,459**
**3,839**|**(19,721)**
**–**
**–**
**–**
**–**|**–**
**300**
**(9)**
**(162)**
**(669)**|**(846)**
**300**
**1,467**
**2,297**
**3,170**|15,245
–
155
2,514
2,893|(13,911)
–
–
–
–|–
(2,800)
–
(166)
(468)|1,334
(2,800)
155
2,348
2,425|
|Open market sales|**10,352**|**(5,867)**|**–**|**4,485**|47,321|(33,404)|–|13,917|
|Other|**1,192**|**–**|**(3,959)**|**(2,767)**|1,046|13|(282)|777|
||**212,182**|**(25,588)**|**(148,263)**|**38,331**|236,846|(47,302)|(145,552)|43,992|
|Gain/(loss) on revaluation of investment
properties (Note 11)
Gain on disposal of fxed assets (Note 5)
**Total of operating activities**|**212,182**
**2021**|**(25,588)**
**2021**
**Cost of**|**(148,263)**
**2021**
**Operating**|**6,156**
**16,539**
**61,026**
**2021**
**Operating**|236,846
2020|(47,302)
Restated
2020
Cost of|(145,552)
Restated
2020
Operating|(5,865)
24,046
62,173
Restated
2020
Operating|
|**Association**|**Turnover**
**£000s**|**sales**
**£000s**|**costs**
**£000s**|**surplus**
**£000s**|Turnover
£000s|sales
£000s|costs
£000s|surplus
£000s|
|**Social housing lettings**|**162,625**|**–**|**(133,684)**|**28,941**|161,884|–|(136,183)|25,701|
|**Other social housing activities**|||||||||
|Charges for support services
First tranche low-cost home
ownership sales
Impairment charge*
Other
**Non-social housing activities**
Commercial income/(expenses)|**5,589**
**9,640**
**–**
**1,471**
**2,457**|**–**
**(9,654)**
**–**
**–**
**–**|**(5,596)**
**–**
**–**
**(9)**
**(162)**|**(7)**
**(14)**
**–**
**1,462**
**2,295**|4,755
5,797
–
155
2,477|–
(5,002)
–
–
–|(5,296)
–
(600)
–
(166)|(541)
795
(600)
155
2,311|
|Private rental lettings|**3,084**|**–**|**(369)**|**2,715**|2,330|–|(340)|1,990|
|Other|**4,777**|**(307)**|**(3,911)**|**559**|4,017|(1)|(4,373)|(357)|
|Gain/(loss) on revaluation of investment
properties (Note 11)
Gain on disposal of fxed assets (Note 5)
**Total of operating activities**|**189,643**
**189,643**|**(9,961)**
**(9,961)**|**(143,731)**
**(143,731)**|**35,951**
**5,602**
**16,070**
**57,623**|181,415
181,415|(5,003)
(5,003)|(146,958)
(146,958)|29,454
(5,650)
23,776
47,580|
* The impairment charge relates to shared ownership properties under construction.
Restated balances are in respect of housing properties, details of which are presented in note 32.
Annual Report and Group Financial Statements 2020-21 **105**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **2a. Particulars of income and expenditure from social housing lettings**
|||Supported|||||
|---|---|---|---|---|---|---|
|||and older|||||
||General|people’s|Affordable|Intermediate|Shared|**2021**|
||needs|housing|rent|rent|ownership|**Total**|
|**Group**|£000s|£000s|£000s|£000s|£000s|**£000s**|
|Rent receivable net of identifable service charges|92,704|14,081|9,679|8,870|14,803|**140,137**|
|Service charges receivable|12,841|2,036|–|636|2,667|**18,180**|
|**Gross rental income**|**105,545**|**16,117**|**9,679**|**9,506**|**17,470**|**158,317**|
|Grant amortisation|6,989|1,054|332|434|1,274|**10,083**|
|**Turnover from social housing lettings **|**112,534**|**17,171**|**10,011**|**9,940**|**18,744**|**168,400**|
|Management costs|(31,725)|(4,816)|(2,069)|(1,584)|(5,845)|**(46,039)**|
|Service charge costs|(14,057)|(2,193)|(936)|(712)|(2,696)|**(20,594)**|
|Rent losses from bad debts|(240)|(31)|(14)|(11)|(2)|**(298)**|
|Routine maintenance|(27,600)|(4,198)|(1,760)|(1,344)|–|**(34,902)**|
|Planned maintenance|(4,566)|(691)|(287)|(218)|–|**(5,762)**|
|Depreciation|(24,289)|(3,596)|(1,522)|(1,166)|–|**(30,573)**|
|**Operating costs on social housing lettings **|**(102,477)**|**(15,525)**|**(6,588)**|**(5,035)**|**(8,543)**|**(138,168)**|
|**Operating surplus on social housing lettings **|**10,057**|**1,646**|**3,423**|**4,905**|**10,201**|**30,232**|
|**Operating margin %**|**9%**|**10%**|**34%**|**49%**|**54%**|**18%**|
|Void losses|957|154|99|414|–|1,624|
|||Supported|||||
|---|---|---|---|---|---|---|
|||and older||||**Restated**|
||General|people’s|Affordable|Intermediate|Shared|**2020**|
||needs|housing|rent|rent|ownership|**Total**|
|**Group**|£000s|£000s|£000s|£000s|£000s|**£000s**|
|Rent receivable net of identifable service charges|91,038|13,275|9,189|8,049|14,780|**136,331**|
|Service charges receivable|12,001|1,748|–|569|2,277|**16,595**|
|**Gross rental income**|**103,039**|**15,023**|**9,189**|**8,618**|**17,057**|**152,926**|
|Grant amortisation|6,842|998|325|482|1,198|**9,845**|
|Management fee|101|15|5|7|18|**146**|
|**Turnover from social housing lettings **|**109,982**|**16,036**|**9,519**|**9,107**|**18,273**|**162,917**|
|Management costs|(31,104)|(4,537)|(2,251)|(1,490)|(5,638)|**(45,020)**|
|Service charge costs|(19,858)|(2,897)|(1,413)|(947)|(3,519)|**(28,634)**|
|Rent losses from bad debts|(1,459)|(213)|(103)|(69)|–|**(1,844)**|
|Routine maintenance|(22,458)|(3,276)|(1,585)|(1,068)|–|**(28,387)**|
|Planned maintenance|(4,015)|(586)|(283)|(191)|–|**(5,075)**|
|Depreciation|(21,817)|(3,182)|(1,543)|(1,038)|–|**(27,580)**|
|**Operating costs on social housing lettings **|**(100,711)**|**(14,691)**|**(7,178)**|**(4,803)**|**(9,157)**|**(136,540)**|
|**Operating surplus on social housing lettings **|**9,271**|**1,345**|**2,341**|**4,304**|**9,116**|**26,377**|
|**Operating margin %**|**8%**|**8%**|**25%**|**47%**|**50%**|**16%**|
|Void losses|275|41|57|264|–|637|
Restated balances are in respect of housing properties, details of which are presented in note 32.
**106 Southern Housing Group**
## **2a. Particulars of income and expenditure from social housing lettings (continued)**
|||Supported
and older|||||
|---|---|---|---|---|---|---|
||General|people’s|Affordable|Intermediate|Shared|**2021**|
|**Association**|needs
£000s|housing
£000s|rent
£000s|rent
£000s|ownership
£000s|**Total**
**£000s**|
|Rent receivable net of identifable service charges|90,695|13,715|9,051|7,830|13,863|**135,154**|
|Service charges receivable|12,266|1,855|–|585|2,209|**16,915**|
|**Gross rental income**|**102,961**|**15,570**|**9,051**|**8,415**|**16,072**|**152,069**|
|Management fee|356|54|17|22|64|**513**|
|Grant amortisation
**Turnover from social housing lettings **
Management costs
Service charge costs
Rent losses from bad debts|6,968
**110,285**
(30,995)
(13,436)
(262)|1,054
**16,678**
(4,687)
(2,032)
(40)|332
**9,400**
(1,932)
(838)
(16)|434
**8,871**
(1,478)
(641)
(13)|1,255
**17,391**
(5,581)
(2,420)
–|**10,043**
**162,625**
**(44,673)**
**(19,367)**
**(331)**|
|Routine maintenance|(27,107)|(4,099)|(1,690)|(1,293)|–|**(34,189)**|
|Planned maintenance|(4,558)|(689)|(284)|(217)|–|**(5,748)**|
|Depreciation|(23,291)|(3,522)|(1,452)|(1,111)|–|**(29,376)**|
|**Operating costs on social housing lettings **|**(99,649)**|**(15,069)**|**(6,212)**|**(4,753)**|**(8,001)**|**(133,684)**|
|**Operating surplus on social housing lettings **|**10,636**|**1,609**|**3,188**|**4,118**|**9,390**|**28,941**|
|**Operating margin %**
Void losses|**10%**
893|**10%**
135|**34%**
96|**46%**
440|**54%**
–|**18%**
1,564|
||General|Supported
and older
people’s|Affordable|Intermediate|Shared|**Restated**
**2020**|
|---|---|---|---|---|---|---|
|**Association**|needs
£000s|housing
£000s|rent
£000s|rent
£000s|ownership
£000s|**Total**
**£000s**|
|Rent receivable net of identifable service charges|91,005|13,275|8,972|7,960|14,292|**135,504**|
|Service charges receivable|11,980|1,748|–|569|2,094|**16,391**|
|**Gross rental income**|**102,985**|**15,023**|**8,972**|**8,529**|**16,386**|**151,895**|
|Management fee
Grant amortisation
**Turnover from social housing lettings **
Management costs
Service charge costs
Rent losses from bad debts|101
6,842
**109,928**
(31,099)
(19,857)
(1,459)|15
998
**16,036**
(4,537)
(2,897)
(213)|5
325
**9,302**
(2,191)
(1,399)
(103)|7
482
**9,018**
(1,478)
(944)
(69)|18
1,196
**17,600**
(5,436)
(3,471)
–|**146**
**9,843**
**161,884**
**(44,741)**
**(28,568)**
**(1,844)**|
|Routine maintenance|(22,458)|(3,276)|(1,582)|(1,067)|–|**(28,383)**|
|Planned maintenance|(4,015)|(586)|(283)|(191)|–|**(5,075)**|
|Depreciation|(21,816)|(3,182)|(1,537)|(1,037)|–|**(27,572)**|
|**Operating costs on social housing lettings **
**Operating surplus on social housing lettings **
**Operating margin %**
Void losses|**(100,704)**
**9,224**
**8%**
272|**(14,691)**
**1,345**
**8%**
41|**(7,095)**
**2,207**
**24%**
57|**(4,786)**
**4,232**
**47%**
263|**(8,907)**
**8,693**
**49%**
–|**(136,183)**
**25,701**
**16%**
633|
Restated balances are in respect of housing properties, details of which are presented in note 32.
Annual Report and Group Financial Statements 2020-21 **107**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **3. Board and senior executive emoluments (key management personnel)**
The remuneration paid to the directors (who for the purposes of this note include the members of the Board, committee members, the Group Chief Executive and any other person who is a member of the Executive Management Team) was as follows:
||**2021**|2020|
|---|---|---|
|**Group**|**£000s**|£000s|
|Emoluments|**1,019**|952|
|Pension contributions|**72**|60|
|Non Executive Board member emoluments|**209**|195|
||**1,300**|1,207|
The remuneration (excluding pension contributions and NI) payable to the Group Chief Executive, who is also the highest paid director was:
|
was:|||
|---|---|---|
||**2021**|2020|
||**£s**|£s|
|Salary|**231,400**|232,927|
|Benefts in kind|**448**|1,034|
|**Total remuneration (excluding pension contributions and NI)**|**231,848**|233,961|
The Remuneration and Nominations Committee sets the pay of the Executive Directors at a level to attract and retain the talent required to lead the Group. In doing this, it takes account of a market comparative exercise which is carried out annually by an independent body. Our aim is not to pay the highest salaries in the market but to remain competitive.
The pension schemes available to the Executive Directors are offered on the same terms as to other staff. There are no different pension arrangements for the Executive Directors.
## **4. Employee information**
|**4. Employee information**|||||
|---|---|---|---|---|
|**Monthly average number of full-time equivalent employees**|**Group**
**2021**|Group
2020|**Association**
**2021**|Association
2020|
|**(FTE = 35 hoursper week):**|**FTE**|FTE|**FTE**|FTE|
|**Average number of full-time equivalent employees**|**1,064**|994|**1,058**|994|
||||||
|**Staff costs**|**Group**
**2021**|Group
2020|**Association**
**2021**|Association
2020|
|**(for the above employees)**|**£000s**|£000s|**£000s**|£000s|
|Wages and salaries|**36,834**|34,057|**36,596**|34,057|
|Social security costs|**3,824**|3,635|**3,797**|3,635|
|Otherpension costs|**3,342**|3,465|**3,242**|3,465|
||**44,000**|41,157|**43,635**|41,157|
Remuneration paid to staff including Executives in bands from £60,000 upwards:
Staff costs for the year are net of proceeds received from the Coronavirus Job Retention scheme grant during the early part of the financial year (2020: Nil).
|
fnancial year (2020: Nil).|||
|---|---|---|
||**Group**|Group|
||**2021**|2020|
|**FTE = 35 hoursper week**|**FTE number**|FTE number|
|£60,000–£70,000|**59**|54|
|£70,000–£80,000|**29**|28|
|£80,000–£90,000|**20**|15|
|£90,000–£100,000|**13**|9|
|£100,000–£110,000|**7**|6|
|£110,000–£120,000|**6**|5|
|£120,000–£130,000|**4**|2|
|£130,000–£140,000|**2**|5|
|£140,000–£150,000|**8**|1|
|£180,000–£190,000|**–**|2|
|£190,000–£200,000|**3**|–|
|£200,000–£210,000|**1**|–|
|£280,000–£290,000|**1**|1|
Remuneration includes salary, allowances, pension contributions, employers NI, benefits in kind and bonus.
**108 Southern Housing Group**
## **5. Gain on disposal of fixed assets**
The gain or loss on disposal of fixed assets is recorded as the net value of the proceeds and the costs of sale which include the carrying value of the proportion of the property being sold and the associated grant.
|||**HomeBuy**|||HomeBuy||
|---|---|---|---|---|---|---|
|||**and other**|||and other||
||**Housing**
**property**|**tangible**
**fxed assets**|**Total**|Housing
property|tangible
fxed assets|Total|
||**2021**|**2021**|**2021**|2020|2020|2020|
|**Group**|**£000s**|**£000s**|**£000s**|£000s|£000s|£000s|
|Sale proceeds|**36,660**|**464**|**37,124**|49,772|2,228|52,000|
|Cost of sales|**(20,353)**|**(166)**|**(20,519)**|(26,737)|(1,079)|(27,816)|
|Incidental sale expenses|**(66)**
**16,241**
**Housing**
**property**|**–**
**298**
**HomeBuy**
**and other**
**tangible**
**fxed assets**|**(66)**
**16,539**
**Total**|(137)
22,898
Housing
property|(1)
1,148
HomeBuy
and other
tangible
fxed assets|(138)
24,046
Total|
||**2021**|**2021**|**2021**|2020|2020|2020|
|**Association**|**£000s**|**£000s**|**£000s**|£000s|£000s|£000s|
|Sale proceeds|**36,484**|**464**|**36,948**|49,772|2,228|52,000|
|Cost of sales|**(20,646)**|**(166)**|**(20,812)**|(27,007)|(1,079)|(28,086)|
|Incidental sale expenses|**(66)**
**15,772**|**–**
**298**|**(66)**
**16,070**|(137)
22,628|(1)
1,148|(138)
23,776|
## **6. Interest receivable and similar income**
Interest income is recognised on a receivable basis as it falls due.
|**6. Interest receivable and similar income**
Interest income is recognised on a receivable basis as it falls due.|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
|**Interest and investment income**|**£000s**|£000s|**£000s**|£000s|
|Interest from investments|**303**|675|**298**|345|
|Intercompany interest receivable|**–**|–|**4,849**|4,089|
|Interest from bank deposits
**Total**|**91**
**394**|515
1,190|**78**
**5,225**|455
4,889|
## **7. Interest payable and similar charges**
Interest payable on loans is recognised on a payable basis as it falls due together with amortisation charges. Interest is capitalised on properties under construction on a fair proportion of the borrowings of the Group and Association as a whole, using the weighted average interest rate for borrowing. The Group’s weighted average interest rate for borrowing is 4.07% per annum (2020: 4.29% per annum).
Premiums on issue of debentures are treated as deferred income and written back to the statement of comprehensive income over the period of the loan.
|**Net Interest and fnance costs charged**
Loans and bonds
Other fees
Less: interestpayable capitalised|**Group**
**2021**
**£000s**
**(39,797)**
**(5,225)**
**6,753**|Group
2020
£000s
(40,244)
(4,275)
5,080|**Association**
**2021**
**£000s**
**(39,760)**
**(3,421)**
**1,337**|Association
2020
£000s
(40,244)
(4,267)
1,047|
|---|---|---|---|---|
||**(38,269)**|(39,439)|**(41,844)**|(43,464)|
|Deferred income written back|**50**|50|**50**|50|
|**Total**|**(38,219)**|(39,389)|**(41,794)**|(43,414)|
Annual Report and Group Financial Statements 2020-21 **109**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **7. Interest payable and similar charges (continued)**
|**7. Interest payable and similar charges (continued)**|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
|**Other fnance costs:pension schemes**|**2021**
**£000s**|2020
£000s|**2021**
**£000s**|2020
£000s|
|**Group pension scheme**|||||
|Expected return on pension scheme assets|**1,693**|1,730|**1,693**|1,730|
|Interest on pension scheme liabilities|**(1,853)**|(1,890)|**(1,853)**|(1,890)|
|**Isle of Wight Council pension scheme**|||||
|Expected return on pension scheme assets|**128**|142|**128**|142|
|Interest onpension scheme liabilities|**(163)**|(188)|**(163)**|(188)|
|**Total**|**(195)**|(206)|**(195)**|(206)|
|**Total interest and similar charges**|**(38,414)**|(39,595)|**(41,989)**|(43,620)|
## **8. Surplus before tax**
The operating surplus before tax is stated after charging/(crediting):
|**8. Surplus before tax**
The operating surplus before tax is stated after charging/(crediting):|||||
|---|---|---|---|---|
|||Restated||Restated|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|**Depreciation:**|||||
|Property|**23,308**|22,374|**22,385**|22,367|
|Other tangible fxed assets|**6,180**|4,120|**6,103**|4,120|
|Impairment (reversal)/charge|**(300)**|2,800|**–**|600|
|**Stock cost of sales recognised as an expense**|**25,588**|47,302|**9,961**|5,003|
|**Operating lease charges:**|||||
|Property|**113**|–|**–**|–|
|Other equipment|**380**|320|**380**|320|
|**Auditors’ remuneration:**|||||
|External audit fee (includingexpenses, excludingVAT)|**340**|265|**280**|205|
Restated balances are in respect of housing properties, details of which are presented in note 32.
## **9. Taxation**
No taxation is payable on the charitable surpluses of the Association. Taxation is chargeable on the surpluses of all subsidiary entities. Surpluses either in whole or in part are transferred to the parent by a gift aid distribution which then reduces the taxation charge accordingly. The tax impact of a gift aid payment is accounted for when it is probable that the gift aid payment will be made. All entities are registered for Value Added Tax (VAT). As the majority of group activities are exempt from VAT the recovery under partial exemption is minimal.
The tax charge has been assessed on the basis that it is probable that gift aid will be paid to the parent by the Group companies within nine months of the year end.
## **Deferred taxation**
Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.
Deferred taxation is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 102 Section 29.
Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
**110 Southern Housing Group**
## **9. Taxation (continued)**
Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the period end and that are expected to apply to the reversal of the timing difference.
|
expected to apply to the reversal of the timing difference.|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
|**UK corporation tax**|**£000s**|£000s|**£000s**|£000s|
|Current tax at 19% (2020: 19%)|**120**|437|**–**|–|
|Adjustment to tax charge/(credit) in respect ofpreviousyears|**21**|(188)|**–**|–|
|**Total tax charge**|**141**|249|**–**|–|
|Deferred tax expense|**(71)**|46|**–**|–|
|Adjustments in respect ofpriorperiods|**(2)**
**68**|–
295|**–**
**–**|–
–|
The total tax charge/(credit) for the year is lower (2020: higher) than the standard rate of corporation tax in the UK 19% (2020: 19%). The differences are explained below.
||**Group**|Group|**Association**|Association|
|---|---|---|---|---|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|**Total tax reconciliation**|||||
|Surplus on ordinary activities before tax|**81,695**|23,618|**34,518**|28,649|
|Adjustment relatingto restatement
Adjusted surplus on ordinary activities before tax
Less surplus from charitable activities
Taxable surplus/(defcit) on ordinaryactivities before tax
Total tax charge|**–**
**81,695**
**(34,518)**
**47,177**
**8,964**|174
23,792
(28,810)
(5,018)
(953)|**–**
**34,518**
**–**
**34,518**
**6,558**|161
28,810
–
28,810
5,474|
|Effects of:|||||
|Non taxable income|**(8,780)**|–|**(6,558)**|(5,474)|
|Timing difference in relation to revaluation|**–**|(33)|**–**|–|
|Change in tax rates|**–**|77|**–**|–|
|Expenses not deductible for tax purposes
Qualifying charitable donations paid or to be paid within 9 months of the
year end
Adjustment to tax charge in respect of previous years
Share of taxableprofts in Triathlon Homes LLP
Total tax(credit)/charge(see above)|**1**
**(257)**
**19**
**121**
**68**|3,686
(2,527)
(188)
233
295|**–**
**–**
**–**
**–**
**–**|–
–
–
–
–|
||**Group**|Group|**Association**|Association|
|---|---|---|---|---|
||**2021**|2020|**2021**|2020|
|**Deferred taxation liability**|**£000s**|£000s|**£000s**|£000s|
|At 1 April|**782**|738|**–**|–|
|Timingdifferences
At 31 March|**(71)**
**711**|44
782|**–**
**–**|–
–|
Deferred tax mainly arises from timing differences relating to revaluation of investment properties.
## **Factors that may affect future tax charges**
The standard rate of corporation tax in the UK remained at 19% in 2021. The rate will remain at 19% for the financial year beginning 1 April 2021. In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. Since the proposal to increase the rate to 25% had not been substantively enacted at the balance sheet date, its effects are not included in these financial statements.
Annual Report and Group Financial Statements 2020-21 **111**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **10. Property, plant and equipment**
Property plant and equipment comprise housing properties and other fixed assets.
## **Housing properties**
Housing properties are held at historic cost less accumulated depreciation. Cost includes the cost of acquiring land and buildings, construction costs as well as directly attributable staff costs and interest capitalised during the development period from commencement on site.
Costs are split between the structure and those major components which require periodic replacement.
Replacement or restoration of such major components is capitalised and depreciated over the average estimated useful life which has been set taking into account professional advice, the Group’s asset management strategy and the requirements of the Decent Homes Standard.
Works to existing properties which result in an increase in the net rental stream over the lives of the properties, thereby enhancing the economic benefits of the assets, are capitalised as improvements. This may be as a result of an increase in net rental income, a reduction in future maintenance costs or a significant extension of the useful economic life of the property.
Housing properties in the course of construction are held at cost and are not depreciated. They are transferred to completed properties when handed over for letting or sale. Capitalisation of development costs ceases at practical completion including the accrual of known costs at that time and all subsequent costs are expensed.
Housing properties are transferred to other asset categories when there is a change in their intended usage.
## **Depreciation**
Freehold land is not subject to depreciation. Depreciation is charged on a straight-line basis over the useful economic lives of fixed assets to write off to the estimated residual value. The following useful economic lives are used:
|
to write off to the estimated residual value. The following useful economic lives are|
used:|
|---|---|
|**Housing properties held for letting:**||
|Structure|100 years|
|Major components||
|Bathroom|30 years|
|Heating system (gas)|15 years|
|Heating system (electric)|25 years|
|Kitchen|20 years|
|Roof (pitched)|60 years|
|Roof (fat)|20 years|
|Windows|30 years|
|Wiring|30years|
Management reviews the useful life of the assets which are depreciated at a component level over their estimated useful economic lives based on experience. For leasehold assets the maximum depreciation period is that of the remaining term of the lease. For those properties occupied on short leases the maximum depreciation period is that of the remaining term of the lease.
Where a decision is made to demolish and redevelop properties, the useful economic life of the asset, including components, is re-estimated at the point that Board approval is obtained and depreciation is then charged over the remaining life of the asset.
**112 Southern Housing Group**
## **10. Property, plant and equipment (continued)**
## **Impairment**
At each balance sheet date, the value of property, plant and equipment assets is formally assessed to determine whether there is an indication of impairment. This assessment is carried out by tenure and at the estate/scheme level, such a level representing a cash generating unit. A scheme is defined as all units of the same tenure within one area or estate.
Impairment is normally assessed scheme by scheme although for assets in use it may be at a block or unit level if more appropriate. Where there is evidence of impairment, fixed assets are written down to their recoverable amount. Any such write down is charged to operating surplus. In line with the Group’s objectives its social housing properties are held for their service potential and not purely for economic return.
Therefore, the Group follows the guidelines of the SORP and uses the depreciated replacement cost of the property as a reasonable estimate of the recoverable amount.
||Housing
properties held
for letting|Shared
ownership
housing
properties|Housing
properties under
construction|Other fxed
assets per
following note|**Total**
**property,**
**plant and**
**equipment**|
|---|---|---|---|---|---|
|**Group**|£000s|£000s|£000s|£000s|**£000s**|
|**Cost**||||||
|At 1 April 2020 restated|1,807,191|300,676|182,225|85,270|**2,375,362**|
|Reclassifcation from investment properties|1,508|–|–|–|**1,508**|
|Reclassifcation to other fxed assets|(73)|–|–|73|**–**|
|Reclassifcation to stock
Schemes completed
Homefex tenure change
Additions: New properties
Existing properties
Other fxed assets|(111)
2,406
(1,306)
2
41,255
–|–
12,515
877
–
477
–|111
(14,921)
–
48,854
–
–|–
–
–
–
–
11,529|**–**
**–**
**(429)**
**48,856**
**41,732**
**11,529**|
|Acquired on the acquisition of Crown Simmons|57,342|4,168|2,571|35|**64,116**|
|Impairment writeback|–|–|171|–|**171**|
|Transfer to stock|–|(1,920)|(471)|–|**(2,391)**|
|Disposals|(21,042)|(7,419)|(343)|(9,428)|**(38,232)**|
|**At 31 March 2021**
**Accumulated depreciation**
At 1 April 2020 restated
Reclassifcation from other fxed assets
Charge for the year
Eliminated in respect of disposals|**1,887,172**
241,260
66
23,308
(5,237)|**309,374**
–
–
–
–|**218,197**
–
–
–
–|**87,479**
31,448
(66)
6,180
(9,323)|**2,502,222**
**272,708**
**–**
**29,488**
**(14,560)**|
|**At 31 March 2021**|**259,397**|**–**|**–**|**28,239**|**287,636**|
|**Net Book Value**||||||
|**At 31 March 2021**|**1,627,775**|**309,374**|**218,197**|**59,240**|**2,214,586**|
|At 31 March 2020 restated|1,565,931|300,676|182,225|53,822|2,102,654|
Restated balances are in respect of housing properties, details of which are presented in note 32.
Detail relating to other fixed assets can be found at the end of note 10.
Annual Report and Group Financial Statements 2020-21 **113**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **10. Property, plant and equipment (continued)**
On the acquisition of Crown Simmons Housing, their market rent properties were valued using the market value subject to existing tenancies (‘MV-T’) model while remaining housing properties were valued using the existing use value for social housing (EUV-SH) model. See note 31 for further details.
|
See note 31 for further details.||||||
|---|---|---|---|---|---|
|||Shared|||**Total**|
||Housing|ownership|Housing|Other fxed|**property,**|
||properties held|housing|properties under|assets per|**plant and**|
|**Association**|for letting
£000s|properties
£000s|construction
£000s|following note
£000s|**equipment**
**£000s**|
|**Cost**||||||
|At 1 April 2020 restated|1,793,670|275,757|73,082|85,270|**2,227,779**|
|Reclassifcation from investment properties|1,508|–|–|–|**1,508**|
|Reclassifcation from/(to) other fxed assets|193|–|–|(193)|**–**|
|Schemes completed|2,358|8,056|(10,414)|–|**–**|
|Homefex tenure change|(1,306)|877|–|–|**(429)**|
|Additions: New properties|6,791|7,977|8,368|–|**23,136**|
|Existing properties|41,162|477|–|–|**41,639**|
|Other fxed assets|–|–|–|11,521|**11,521**|
|Transfer to stock|–|(1,920)|–|–|**(1,920)**|
|Disposals|(21,041)|(7,827)|(250)|(9,428)|**(38,546)**|
|**At 31 March 2021**|**1,823,335**|**283,397**|**70,786**|**87,170**|**2,264,688**|
|**Accumulated depreciation**||||||
|At 1 April 2020 restated|241,086|–|–|31,448|**272,534**|
|Reclassifcation from/(to) other fxed assets|66|–|–|(66)|**–**|
|Charge for the year|22,385|–|–|6,103|**28,488**|
|Eliminated in respect of disposals|(5,237)|–|–|(9,323)|**(14,560)**|
|**At 31 March 2021**|**258,300**|**–**|**–**|**28,162**|**286,462**|
|**Net Book Value**||||||
|**At 31 March 2021**|**1,565,035**|**283,397**|**70,786**|**59,008**|**1,978,226**|
|At 31 March 2020 restated|1,552,584|275,757|73,082|53,822|1,955,245|
Restated balances are in respect of housing properties, details of which are presented in note 32.
Detail relating to other fixed assets can be found at the end of note 10.
**114 Southern Housing Group**
## **10. Property, plant and equipment (continued) Properties held for security**
Loan facilities, both drawn and undrawn, totalling £1,387m (2020: £1,415m) are secured against 17,189 (2020: 17,266) properties.
## **Accommodation in management comprises:**
|**Accommodation in management comprises:**||||||
|---|---|---|---|---|---|
|||||Group units||
||Group units|Group units|Group units|tenure|**Group units**|
||2020|additions|disposals|change/other|**2021**|
|**Units owned and managed:**||||||
|General needs|17,533|331|(207)|33|**17,690**|
|Housing for older people
Supported housing
Intermediate rent
Private rent (investment properties)
Affordable rent|2,163
394
842
261
1,280|76
10
91
27
44|(8)
(4)
–
–
(14)|24
46
(5)
(26)
(164)|**2,255**
**446**
**928**
**262**
**1,146**|
|Leasehold|2,941|107|(15)|(110)|**2,923**|
|Shared ownership|3,215|130|(11)|(6)|**3,328**|
||28,629|816|(259)|(208)|**28,978**|
|**Units managed on behalf of other landlords:**||||||
|General needs|692|–|–|(17)|**675**|
|Supported housing
Intermediate rent
Leasehold
Shared ownership
**Total units managed**|72
294
130
313
1,501
30,130|–
–
36
–
36
852|(5)
–
–
–
(5)
(264)|–
–
(1)
(2)
(20)
(228)|**67**
**294**
**165**
**311**
**1,512**
**30,490**|
|**Total units owned**|28,629|816|(259)|(208)|**28,978**|
## **Accommodation in management comprises:**
|**Accommodation in management comprises:**||||||
|---|---|---|---|---|---|
|**Units owned and managed:**
General needs
Housing for older people
Supported housing|Association
units
2020
17,529
2,163
394|Association
units
additions
–
–
10|Association
units
disposals
(207)
(8)
(4)|Association
units tenure
change/other
35
24
46|**Association**
**units**
**2021**
**17,357**
**2,179**
**446**|
|Intermediate rent|833|–|(13)|8|**828**|
|Private rent (investment properties)|226|27|–|(20)|**233**|
|Affordable rent|1,235|10|(14)|(149)|**1,082**|
|Leasehold
Shared ownership
**Units managed on behalf of other landlords:**
General needs
Housing for older people|2,788
3,064
28,232
696
–|–
76
123
333
76|(15)
(11)
(272)
–
–|(105)
(3)
(164)
(17)
–|**2,668**
**3,126**
**27,919**
**1,012**
**76**|
|Supported housing|72|–|(5)|–|**67**|
|Intermediate rent|303|91|–|–|**394**|
|Affordable rent|45|42|–|(15)|**72**|
|Leasehold|283|107|39|(4)|**425**|
|Shared ownership|464|58|–|(6)|**516**|
||1,863|707|34|(42)|**2,562**|
|**Total units managed**|30,095|830|(238)|(206)|**30,481**|
|**Total units owned**|28,232|123|(272)|(164)|**27,919**|
Annual Report and Group Financial Statements 2020-21 **115**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **10. Property, plant and equipment (continued)**
## **Other fixed assets**
Other tangible fixed assets are stated at historic cost less accumulated depreciation and any accumulated impairment losses. Historic cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged on a straight-line basis over the useful economic lives of fixed assets to write off the cost to the estimated residual value at the annual rates below. For those properties occupied on short leases the maximum depreciation period is that of the remaining term of the lease.
Freehold and leasehold properties Plant and machinery Estate equipment and offices, fixtures and fittings Computer hardware and software
100 years 15 years 5–10 years 3 years
||||Plant,|||
|---|---|---|---|---|---|
||Freehold and|Estate|machinery,|Computer||
|**Group**|leasehold
properties
£000s|equipment
and offces
£000s|fxtures and
fttings
£000s|hardware and
software
£000s|**Total other**
**fxed assets**
**£000s**|
|**Cost**||||||
|At 1 April 2020|28,361|32,944|2,068|21,897|**85,270**|
|Reclassifcation|2,815|266|–|(3,008)|**73**|
|Additions|1,011|5,668|–|4,850|**11,529**|
|Acquired on Crown Simmons acquisition|–|–|26|9|**35**|
|Disposals|(28)|(1,205)|(1,452)|(6,743)|**(9,428)**|
|**At 31 March 2021**|**32,159**|**37,673**|**642**|**17,005**|**87,479**|
|**Accumulated depreciation**||||||
|At 1 April 2020 restated|5,973|14,700|1,915|8,860|**31,448**|
|Reclassifcation|(66)|–|–|–|**(66)**|
|Charge for year|1,499|1,691|24|2,966|**6,180**|
|Disposals|(28)|(1,103)|(1,449)|(6,743)|**(9,323)**|
|**At 31 March 2021**|**7,378**|**15,288**|**490**|**5,083**|**28,239**|
|**Net Book Value**||||||
|**At 31 March 2021**|**24,781**|**22,385**|**152**|**11,922**|**59,240**|
|At 31 March 2020 restated|22,388|18,244|153|13,037|53,822|
||Commercial,||Plant,|||
|---|---|---|---|---|---|
||freehold and|Estate|machinery,|Computer||
|**Association**|leasehold
properties
£000s|equipment
and offces
£000s|fxtures and
fttings
£000s|hardware and
software
£000s|**Total other**
**fxed assets**
**£000s**|
|**Cost**||||||
|At 1 April 2020|28,361|32,944|2,068|21,897|**85,270**|
|Reclassifcation|2,815|–|–|(3,008)|**(193)**|
|Additions|1,003|5,668|–|4,850|**11,521**|
|Disposals|(28)|(1,205)|(1,452)|(6,743)|**(9,428)**|
|**At 31 March 2021**|**32,151**|**37,407**|**616**|**16,996**|**87,170**|
|**Accumulated depreciation**||||||
|At 1 April 2020 restated|5,973|14,700|1,915|8,860|**31,448**|
|Reclassifcation|(66)|–|–|–|**(66)**|
|Charge for year|1,499|1,637|10|2,957|**6,103**|
|Disposals|(28)|(1,103)|(1,449)|(6,743)|**(9,323)**|
|**At 31 March 2021**|**7,378**|**15,234**|**476**|**5,074**|**28,162**|
|**Net Book Value**||||||
|**At 31 March 2021**|**24,773**|**22,173**|**140**|**11,922**|**59,008**|
|At 31 March 2020 restated|22,388|18,244|153|13,037|53,822|
Total assets under construction included above are £3,037k (2020 restated: £8,281k) of which £907k (2020 restated: £1,029k) relate to internally generated costs paid in the year.
**116 Southern Housing Group**
## **11. Investment properties**
Properties for market rent or commercial lettings are included as investment properties and are recorded at fair value with changes in the market value reported in the statement of comprehensive income. No depreciation is provided in respect of investment properties.
At 31 March 2021 all commercial properties were market valued externally by Copping Joyce, qualified RICS Chartered Surveyors. The valuation adopted a rent capitalisation methodology into the perpetuity at an appropriate yield using floor areas and rental values. In the instance of properties having a dual use as offices and commercial lettings the cost is split by use using the proportion of floor area with office carrying cost being disclosed in property, plant and equipment.
Developments under construction with a commercial property tenure are required to be split out from housing properties and classified as investment properties under construction. The commercial element is then valued as part of our investment portfolio at fair value and a gain or loss on revaluation recognised.
Residential properties held for investment and rented at market rents were valued on a case by case open market value basis adopting the investment method of valuation where appropriate by Copping Joyce. The valuation model used an assumption that the properties are sold as single investment blocks.
All the above valuations were carried out by Copping Joyce in accordance with the RICS Valuation Global Standards 2020 incorporating the IVSC (International Valuation Standards Council) effective 31 January 2020, produced by The Royal Institution of Chartered Surveyors (commonly known as ‘The Red Book’).
The key variables in the valuation of residential properties held for private rent are market rents and capitalisation rates (yields). An increase in yield of 0.25% and reduction in rent of 2.5% results in a value reduction of approximately £6,599k (7.4%). For the commercial portfolio an increase in yield of 0.25% and reduction in rent of 2.5% would lead to a decrease in the valuation of £3,685k (7.0%). These figures are disclosed as an indicator of potential sensitivity only.
|Valuation at 1 April|**Group**
**2021**
**£000s**
**143,299**|Group
2020
£000s
106,934|**Association**
**2021**
**£000s**
**125,315**|Association
2020
£000s
90,110|
|---|---|---|---|---|
|Reclassifcation to stock|**(4,459)**|(924)|**–**|–|
|Additions|**18,660**|42,499|**1,900**|40,200|
|Disposals|**–**|(143)|**–**|(143)|
|Transfer (to)/from fxed assets|**(1,508)**|798|**(1,508)**|798|
|Gain/(loss) on revaluation of investmentproperties
At 31 March|**6,156**
**162,148**|(5,865)
143,299|**5,601**
**131,308**|(5,650)
125,315|
The above includes developments under construction of £20,500k (2020: £2,290k).
## **12. Investment in social HomeBuy**
The Group retains a stake in homes purchased through the HomeBuy and Starter Homes Initiative schemes which are regarded as public benefit entity concessionary loans. They are held in the statement of financial position, recorded at transaction value, being the share of value of the property at the date of acquisition, as opposed to being held at the fair value of the loans which FRS 102 would otherwise require.
The loan is repayable on the sale of the underlying property with any proportionate excess achieved on the sale value over the loan value being reported through the statement of comprehensive income.
Investments in HomeBuy and Starter Home Initiatives are funded through social housing grant. The Association funds 6% of the stake in Starter Home Initiatives, with the remainder being funded through social housing grant. No interest is payable. The security is a charge on the property and repayment is due upon the sale of the property. There are no concessionary loans committed but not taken up at year end.
|
year end.|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|HomeBuyand Starter Home Initiatives|**7,101**|7,267|**7,101**|7,267|
Annual Report and Group Financial Statements 2020-21 **117**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **13. Unlisted investments**
The unlisted investments comprise interest bearing cash deposits placed as a guarantee for loans from The Housing Finance Corporation Limited (‘THFC’). These are held at cost adjusted for any increases in amounts deposited or withdrawn and impairment. The deposits are held as interest cover with differing maturity and interest rates in line with the loan facility agreements. Interest receivable is accounted for on an accruals basis.
The endowment is held by Fellowship Houses Trust and is held at fair value.
|The endowment is held by Fellowship Houses Trust and is held at fair value.|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
|**Unlisted investments**|**£000s**|£000s|**£000s**|£000s|
|At 1 April|**7,888**|8,084|**7,888**|8,084|
|Cash deposit movement|**(1)**|(196)|**(1)**|(196)|
|Cash deposit|**7,887**|7,888|**7,887**|7,888|
|Acquisition of endowment from Crown Simmons|**138**|–|**–**|–|
|Revaluation of endowment|**33**|–|**–**|–|
|Endowment|**171**|–|**–**|–|
|**At 31 March**|**8,058**|7,888|**7,887**|7,888|
## **14. Investment in connected entities**
The investment in subsidiary of £3,544k (2020: £1,740k) relates to Spruce Homes Limited and Rosemary Simmons Memorial Housing Association Limited and is supported by the net assets of the subsidiaries. The investment loan comprises redeemable loan notes issued to Affinity (Reading) Holdings Limited.
|
to Affnity (Reading) Holdings Limited.|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|**Cost**|||||
|Investment in subsidiary|**–**|–|**3,544**|1,740|
|Investment loan tojoint venture entity|**2,146**|1,968|**2,146**|1,968|
||**2,146**|1,968|**5,690**|3,708|
||||||
|||Wholly owned|Joint venture||
|||subsidiary|entity|Association|
|||£000s|£000s|£000s|
|**Movement**|||||
|At 1 April 2020||1,740|1,968|3,708|
|Net increase in investment||1,804|178|1,982|
|At 31 March 2021||**3,544**|**2,146**|**5,690**|
See note 27 for details of the Group’s ownership interests in subsidiaries and affiliates.
## **15. Investment in joint ventures**
Joint ventures are those entities over which the Group exercises joint control through a contractual arrangement. Affinity Housing Services (Reading) is accounted for as a jointly controlled operation where the share of operations is brought directly into the Group and Association financial statements. Affinity (Reading) Holdings Limited is accounted for as a jointly controlled entity. In the Association figures it is held at cost less any impairment, in the Group it is held using the equity method of accounting.
|
fgures it is held at cost less any impairment, in the Group it is held using the|
equity method|
of accounting.|
||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Triathlon Homes LLP|**–**|–|**–**|–|
|Affnity (Reading) Holdings Limited|||||
|Investment|**1,294**|1,294|**1,294**|1,294|
|Share of accumulated surplus|**461**|616|**–**|–|
||**1,755**|1,910|**1,294**|1,294|
**118 Southern Housing Group**
## **15. Investment in joint ventures (continued)**
## **Southern Housing Group Limited holds:**
A 50% partnership capital in Affinity Housing Services (Reading), a joint venture with Abri Group, which is accounted for as a jointly controlled operation. The joint venture has a 33% holding in Affinity (Reading) Holdings Limited, which holds 100% of the share capital of Affinity (Reading) Limited, the operator of a PFI contract to supply refurbishment, management and maintenance services to part of Reading Borough Council’s housing portfolio.
A 33.33% direct holding in Affinity (Reading) Holdings Limited, which together with the indirect holding described above, gives a total interest of 50%. The indirect interest is accounted for through the accounting of Affinity Housing Services (Reading). The direct interest is accounted for as a jointly controlled entity. In the Association it is held at cost less impairment and in the Group it is held using the equity method of accounting.
Southern Space Limited holds a one-third interest in Triathlon Homes LLP, a joint venture with First Base 4 Stratford LLP and East Place Limited. The principal activity of Triathlon Homes LLP is the management of the social housing within East Village, Stratford. Following the final handover of all units by the developer to Triathlon Homes LLP, all units are used for social housing in a variety of tenures.
Triathlon Homes LLP is accounted for as a jointly controlled entity and has net negative reserves due to a negative cash flow hedge reserve. The Group has no contractual liability for the resultant losses.
## **16. Stock**
Completed property stock and properties under construction for outright sale are valued at the lower of cost and net realisable value. Cost comprises land, materials, direct labour, direct development overheads and interest capitalised during the development period from commencement on site. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal.
Stock in the course of construction is assessed against the net realisable value of the asset for impairment.
Shared ownership properties held for sale and under construction are split proportionally between stock and fixed assets, based on the expected first tranche proportion. First tranche proportions are accounted for as stock and the related sales proceeds are shown in turnover. The remaining elements of the shared ownership properties are accounted for as fixed assets. Subsequent sales are treated as part disposals of fixed assets.
|
as part disposals of fxed assets.|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Under construction – frst tranche shared ownership
Under construction – open market sales
Completed properties – frst tranche shared ownership
Completedproperties – open market sales|**63,505**
**36,026**
**11,513**
**3,395**
**114,439**|37,449
50,172
16,350
5,738
109,709|**1,399**
**14,966**
**7,570**
**–**
**23,935**|3,858
5,648
8,080
–
17,586|
## **17. Trade and other debtors**
Trade and other debtors are measured at transaction price less any impairment.
||**Group**|Group|**Association**|Association|
|---|---|---|---|---|
||**2021**|2020|**2021**|2020|
|Rent and service charges in arrears
Less:provision for bad and doubtful debts
Amounts due from group undertakings
Other debtors|**£000s**
**10,482**
**(4,148)**
**6,334**
**–**
**6,598**|£000s
9,177
(3,780)
5,397
–
17,799|**£000s**
**10,192**
**(4,070)**
**6,122**
**234,276**
**5,629**|£000s
9,142
(3,776)
5,366
198,819
6,247|
|Prepayments and accrued income|**4,686**|2,680|**4,676**|2,680|
||**17,618**|25,876|**250,703**|213,112|
The £233,531k (2020: £198,819k) due to the Association from group undertakings relates to revolving loans to fund working capital with final repayment due after more than one year and the balances are expected to fluctuate in the short term. The loans are secured via a charge on the entity’s assets at interest rates between 1.1% and 3% over 3 month LIBOR (London Inter-bank Offered Rate).
Annual Report and Group Financial Statements 2020-21 **119**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **18. Creditors: amounts falling due within one year**
Trade and other creditors and housing loans are carried at amortised cost.
|**18. Creditors: amounts falling due within one year**
Trade and other creditors and housing loans are carried at amortised cost.|||||
|---|---|---|---|---|
|||Restated||Restated|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Social housing grant received in advance|**201**|201|**201**|201|
|Recycled capital grant fund (RCGF)|**8,364**|7,626|**8,364**|7,626|
|Disposal proceeds fund (DPF)|**–**|15|**–**|15|
|Amounts due to group undertakings|**–**|–|**990**|943|
|Accruals|**38,166**|28,970|**28,515**|22,107|
|Deferred income|**1,491**|–|**1,491**|–|
|Corporation tax|**185**|1,221|**–**|–|
|Other taxation and social security|**303**|177|**264**|177|
|Other creditors|**24,494**|23,228|**20,411**|22,223|
|Grant repayable|**4,063**|4,047|**4,063**|4,047|
|Housingloans|**41,002**|47,494|**41,000**|47,494|
||**118,269**|112,979|**105,299**|104,833|
Restated balances are in respect of housing properties, details of which are presented in note 32.
Amounts collected from shared ownership leaseholders in respect of service charges, not yet expended, of £10,967k (2020: £10,231k) and trade creditors of £4,812k (2020: £5,406k) are reflected above in other creditors.
## **19. Creditors: amounts falling due after more than one year**
|||Restated||Restated|
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|19a Housing loans and listed bonds|**945,509**|930,938|**945,210**|930,938|
|19b Deferred income|**760,820**|762,617|**746,628**|750,088|
|19c Recycled capitalgrant fund (RCGF)|**6,138**|6,441|**6,099**|6,408|
||**1,712,467**|1,699,996|**1,697,937**|1,687,434|
||||||
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
|**19a Housing loans and listed bonds**|**£000s**|£000s|**£000s**|£000s|
|Housing loans falling due after one year|**528,883**|515,690|**528,584**|515,690|
|Bonds|**425,000**|425,000|**425,000**|425,000|
|Loan set-up costs|**(5,950)**|(7,016)|**(5,950)**|(7,016)|
|Other loan costs|**(2,424)**|(2,736)|**(2,424)**|(2,736)|
|Loans at amortised cost|**945,509**|930,938|**945,210**|930,938|
Housing loans and bonds are secured by specific charges on 17,189 (2020: 17,266) of the Group’s housing units and are repayable in instalments due as follows:
||**Group**|Group|**Association**|Association|
|---|---|---|---|---|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Housing loans falling due within one year|**31,108**|37,237|**31,106**|37,237|
|Interest accrued|**9,894**|10,257|**9,894**|10,257|
|Total housingloans fallingdue within oneyear|**41,002**|47,494|**41,000**|47,494|
|Between one and two years|**19,446**|37,106|**19,444**|37,106|
|Between two and fve years|**168,006**|134,573|**167,997**|134,573|
|In fveyears or more|**766,431**|769,011|**766,143**|769,011|
|Total housingloans and bonds fallingdue after more than oneyear|**953,883**|940,690|**953,584**|940,690|
|Total housingloans and bonds excludingloan set upcosts and other costs|**994,885**|988,184|**994,584**|988,184|
**120 Southern Housing Group**
## **19. Creditors: amounts falling due after more than one year (continued)**
Housing loans bear fixed rates of interest ranging from 1.0% to 11.5% or variable rates based on a margin above LIBOR. The final instalments fall due for repayment during the period 2020 to 2047.
The Group has three publicly listed bonds the terms of which are: – 3.5% £300m 2047
- 4.5% £75m 2039
- 5.354% £50m 2044
Housing loans are subject to compliance with a number of financial covenants such as interest cover and gearing.
## **19b Deferred income**
|**19b Deferred income**|||||
|---|---|---|---|---|
||**Group**
**2021**
**£000s**|Restated
Group
2020
£000s|**Association**
**2021**
**£000s**|Restated
Association
2020
£000s|
|Social and other housing grant b/fwd|**761,905**|733,757|**749,376**|727,843|
|Social housing grant received in the year|**14,263**|46,300|**14,026**|41,155|
|Grant repaid|**–**|101|**–**|101|
|Intra group transfer|**–**|–|**(1,427)**|–|
|Grant on disposals|**(8,589)**|(9,160)|**(8,589)**|(9,160)|
|Transfer to RCGF
Grant amortisation released on disposals
Amortisation of social housing grant inyear
Deferred income – social and other housing grant c/fwd
Premium on debentures
Deferred income|**(160)**
**2,607**
**(9,611)**
**760,415**
**92**
**313**|(1,682)
2,433
(9,844)
761,905
143
569|**(160)**
**2,607**
**(9,610)**
**746,223**
**92**
**313**|(3,154)
2,433
(9,842)
749,376
143
569|
||**760,820**|762,617|**746,628**|750,088|
Restated balances are in respect of housing properties, details of which are presented in note 32.
## **19c Recycled capital grant fund**
|**19c Recycled capital grant fund**|||||
|---|---|---|---|---|
|**Balance relating to Homes England**
Balance at 1 April
Grant released on sales
Greater London Authority (GLA) transfer|**Group**
**2021**
**£000s**
**9,867**
**946**
**(13)**|Group
2020
£000s
8,363
1,440
–|**Association**
**2021**
**£000s**
**9,867**
**946**
**(13)**|Association
2020
£000s
8,363
1,440
–|
|Interest added to fund|**10**|64|**10**|64|
|Acquired on acquisition of Crown Simmons|**39**|–|**–**|–|
|Balance at 31 March
Comprising amounts:
Due within one year
Due in more than oneyear|**10,849**
**8,364**
**2,485**
**Group**|9,867
7,247
2,620
Group|**10,810**
**8,364**
**2,446**
**Association**|9,867
7,247
2,620
Association|
||**2021**|2020|**2021**|2020|
|**Balance relating to the GLA**|**£000s**|£000s|**£000s**|£000s|
|Balance at 1 April|**4,200**|3,774|**4,167**|3,741|
|Grant released on sales|**1,654**|1,926|**1,654**|1,926|
|Interest added to fund|**5**|22|**5**|22|
|Intra-group transfer|**–**|–|**33**|(1,472)|
|Social housing grant transfer|**(2,219)**|–|**(2,219)**|–|
|Homes England transfer|**13**|–|**13**|–|
|Grant recycled into new schemes|**–**|(1,522)|**–**|(50)|
|Balance at 31 March|**3,653**|4,200|**3,653**|4,167|
|Comprising amounts:|||||
|Due within one year|**–**|379|**–**|379|
|Due in more than oneyear|**3,653**|3,821|**3,653**|3,788|
|Total due within one year|**8,364**|7,626|**8,364**|7,626|
|Total due in more than oneyear|**6,138**|6,441|**6,099**|6,408|
Annual Report and Group Financial Statements 2020-21 **121**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **20. Social housing grant**
The Group receives financial assistance from Homes England and the GLA. These government grants are accounted for as deferred income in the statement of financial position and are amortised annually to the statement of comprehensive income based on the life of the building structure, which is 100 years.
Government grant amounts amortised represents a contingent liability to the entity and will be recognised as a liability when the properties funded by the relevant government grant are disposed of or when the property ceases to be used for social housing purposes as disclosed in note 30.
The analysis of the assistance from government sources in the form of government grants is:
||||Restated||Restated|
|---|---|---|---|---|---|
|||**Group**|Group|**Association**|Association|
|||**2021**|2020|**2021**|2020|
||Note|**£000s**|£000s|**£000s**|£000s|
|Government fundingreceived|19b|**760,415**|761,905|**746,223**|749,376|
|Grants amortised in theyear (contingent liabilities)||**9,611**|9,844|**9,610**|9,842|
Restated balances are in respect of housing properties, details of which are presented in note 32.
## **21. Provisions for liabilities and charges**
Provisions are recognised when it is probable that the Group will have to incur costs to satisfy a legal or constructive obligation. The amount recognised is management’s best estimate of the costs that will be incurred to meet the obligation identified.
||**Group**|Group|**Association**|Association|
|---|---|---|---|---|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Balance at 1 April|**3,500**|–|**2,500**|–|
|Provision recognised, net of utilisation|**3,992**|3,500|**4,212**|2,500|
|Balance as at 31 March|**7,492**|3,500|**6,712**|2,500|
The provision of £6,712k (2020: £2,500k) for the Association relates to the anticipated cost of capital building safety works where an obligation has been created. The remaining £780k (2020: £1,000k) provision represents the remaining costs of completing the build of a commercial unit at a development scheme where the Group is committed to constructing the asset as part of the terms of purchasing the land. It is expected that these costs will be incurred within the next two or three years.
## **22. Called up share capital**
|**22. Called up share capital**|||
|---|---|---|
||**2021**|2020|
|**Shares of £1 each issued and fully paid:**|**£s**|£s|
|Balance at 1 April|**7**|6|
|Shares issued during year|**3**|2|
|Shares surrendered during year|**(1)**|(1)|
|As at 31 March|**9**|7|
The share capital of the Association consists of shares of £1 each which carry no rights to dividends or other income. Shares in issue are not capable of being repaid or transferred. When a shareholder ceases to be a member, that person’s share capital is cancelled.
## **23. Capital commitments**
|**23. Capital commitments**|||||
|---|---|---|---|---|
||**Group**|Group|**Association**|Association|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Capital expenditure contracted but notprovided for in the fnancial statements|**166,067**|153,114|**7,574**|20,313|
|Capital expenditure authorised but not contracted|**337,426**|185,092|**115,676**|61,779|
Committed development expenditure for the Group and Association will be financed through £32,395k (2020: £31,535k) grant with the balance funded through cash balances, cash generated from property sales and borrowings on undrawn funding facilities. It is not possible to identify the exact split of the funding.
**122 Southern Housing Group**
## **24. Operating leases**
## **Leased assets**
Payments under cancellable operating leases are charged to the statement of comprehensive income on a straight line basis over the life of the lease.
|
of the lease.|||
|---|---|---|
||**Total**|Total|
||**2021**|2020|
|**Future minimum leasepayments**|**£000s**|£000s|
|Within one year|**140**|5|
|Between one and fve years|**851**|288|
|Over fveyears|**16**|63|
||**1,007**|356|
## **Operating leases with tenants**
The Group’s rental properties other than those held for investment purposes are tenanted under cancellable operating leases with typical tenant break clauses of four weeks. Rents vary in line with the Rent Standard as set by the Government and affected by the Welfare Reform and Work Act 2016. The Group share of equity in a shared ownership property may be purchased by its leaseholder at any time at the pro-rata market rate at which point ongoing lease payments will be adjusted according to the share of ownership retained by the Group.
Income on all operating leases is recorded in the statement of comprehensive income as the rent falls due. The Group’s residential market rented properties are let under operating leases which are cancellable ranging from four weeks to three month notice periods. The Group’s commercial properties are let under non-cancellable operating leases.
The Group’s future minimum operating lease receipts from commercial properties under non-cancellable arrangements were:
|**Minimum amounts due within:**
**2021**
**£000s**
Less than one year
**1,994**
Later than one year and not later than fve years
**6,809**|2020
£000s
2,340
6,660|
|---|---|
|Later than fveyears
**2,259**|3,676|
|**11,062**|12,676|
## **25. Post employment benefits**
The Group operates three defined benefit schemes all of which are closed to new members. There is one defined contribution scheme.
## a) Defined benefit schemes
Southern Housing Group Limited contributes to the Southern Housing Group scheme which has been closed to new members since 31 March 2003.
Southern Housing Group Limited also contributed during the year to:
- The Isle of Wight Council Pension fund for employees who transferred from the Isle of Wight Council.
- The Islington local government pension scheme in which there is only 1 member, the share of scheme assets and liabilities of which are not material to the Southern Housing Group Limited financial statements.
## b) Defined contribution scheme
A defined contribution scheme administered by Scottish Widows Limited based on an incentive matched scale, where the employer contribution increases the more the employee contributes.
Regular valuations of the defined benefit schemes are prepared by independent, professionally qualified actuaries. These determine the level of contributions required to fund the benefits set out in the rules of the pension fund. The current service cost of providing retirement benefits to employees during the year, together with the cost of any benefits relating to past service, admin costs and net interest are charged against the operating surplus in the year. Remeasurement of the net liability (or asset) is recognised as actuarial gains/(losses) in other comprehensive income.
Annual Report and Group Financial Statements 2020-21 **123**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **25. Post employment benefits (continued)**
Employer contributions paid to all defined contribution schemes are charged to the statement of comprehensive income.
The Group has six commercial units and 57 private rent units secured against the Southern Housing Group pension plan at a carrying value of £40.8m.
The amounts recognised in the statement of financial position for the Group’s defined benefit schemes are as follows:
||**Group**|Group|**Association**|Association|
|---|---|---|---|---|
||**2021**|2020|**2021**|2020|
||**£000s**|£000s|**£000s**|£000s|
|Southern Housing Group Pension scheme|**(11,670)**|(6,841)|**(11,670)**|(6,841)|
|Isle of Wight Pension scheme|**(1,536)**|(1,733)|**(1,536)**|(1,733)|
|Total net defcit|**(13,206)**|(8,574)|**(13,206)**|(8,574)|
## **Southern Housing Group Pension Scheme**
Southern Housing Group Limited is the sponsoring employer of a funded defined benefit pension scheme (the Plan) in the UK, which provides retirement benefits based on members’ salary when leaving employment. The assets of the Plan are held in a separately administered fund which is administered by a trustee body (independent of Southern Housing Group Limited) who are responsible for ensuring that the Plan is sufficiently funded to meet current and future obligations.
The present value of the defined benefit obligation and the related current service cost were measured using the projected unit credit method. The last full actuarial valuation was carried out at 31 March 2018.
Southern Housing Group Limited has agreed a funding plan with the trustee of the Plan, whereby ordinary contributions are made into the Plan based on a percentage of active employees’ salary. Additional contributions are agreed with the trustee of the Plan to reduce the funding deficit where necessary. The disclosures set out below are based on calculations carried out as at 31 March 2021 by an independent qualified actuary.
On 30 September 2020 Crown Simmons Housing transferred all liabilities out of the Social Housing Pension Scheme (SHPS) into the SHG Scheme 2017 and is no longer a participating member of the SHPS scheme.
## **SHG Scheme 1964**
During the year, the Group paid contributions at a rate of 30.1% of pensionable pay. No additional deficit payments were made in the year (2020: £165,615).
The employer contribution rate to be applied from 1 April 2021 is 30.1%.
The results of the calculations and the assumptions adopted are shown below.
|The results of the calculations and the assumptions adopted are shown below.|||
|---|---|---|
||**2021**|2020|
|**Actuarial assumptions**|**% pa**|% pa|
|Rate of increase in salaries|**3.05**|2.10|
|Discount rate|**2.05**|2.30|
|Infation assumption – RPI|**3.30**|2.60|
|Infation assumption – CPI|**2.55**|1.60|
||||
|**Mortality assumptions**|Male|Female|
|Current pensioner aged 65|21.60|23.60|
|Future retiree upon reaching65|22.90|25.10|
The major categories of scheme assets as a percentage of total scheme assets are:
|The major categories of scheme assets as a percentage of total scheme assets are:|||
|---|---|---|
||**2021**|2020|
||**%**|%|
|Equities|**38.03**|45.20|
|Diversifed growth fund and LDI|**61.47**|54.50|
|Cash|**0.50**|0.30|
|**Total**|**100.00**|100.00|
**124 Southern Housing Group**
## **25. Post employment benefits (continued) SHG Scheme 1964 (continued)**
|**25. Post employment benefts (continued)**
**SHG Scheme 1964 (continued)**||||
|---|---|---|---|
|**Net defned beneft liability**||**2021**
**£000s**|2020
£000s|
|Fair value of scheme assets||**53,985**|45,283|
|Present value of defned beneft obligation||**(59,116)**|(49,210)|
|**Defned beneft liability recognised in statement of fnancialposition**||**(5,131)**|(3,927)|
|||||
|||**2021**|2020|
|**Total expense recognised in statement of comprehensive income**||**£000s**|£000s|
|Current service cost
Administration expenses
Net interest cost
**Total recognised in the statement of comprehensive income**||**405**
**3**
**85**
**493**|448
38
82
568|
|||||
||Assets|Liabilities|**Total**|
|**Reconciliation of scheme assets and liabilities**|£000s|£000s|**£000s**|
|**At 1 April 2020**|45,283|(49,210)|**(3,927)**|
|Benefts paid|(1,379)|1,379|**–**|
|Current service cost|–|(405)|**(405)**|
|Interest income/(cost)
Administration expenses
Employer contributions
Employee contributions
Actuarial losses|1,031
(3)
364
59
–|(1,116)
–
–
(59)
(9,705)|**(85)**
**(3)**
**364**
**–**
**(9,705)**|
|Return on scheme assets excludinginterest income|8,630|–|**8,630**|
|**At 31 March 2021**|53,985|(59,116)|**(5,131)**|
## **SHG Scheme 2017**
During the year the Group paid contributions at a rate of 20.7% of pensionable pay. In addition a further payment of £450,000 (2020: £501,249) was made towards an identified deficit.
The employer contribution rate to be applied from 1 April 2021 is 20.7%.
The results of the calculations and the assumptions adopted are shown below.
|**Actuarial assumptions**|**2021**
**% pa**|2020
% pa|
|---|---|---|
|Rate of increase in salaries|**3.35**|2.60|
|Discount rate|**2.05**|2.30|
|Infation assumption – RPI|**3.35**|2.60|
|Infation assumption – CPI
**Mortality assumptions**
Current pensioner aged 65
Future retiree upon reaching65|**2.75**
Male
21.60
22.90|1.60
Female
23.60
25.10|
The major categories of scheme assets as a percentage of total scheme assets are
||**2021**|2020|
|---|---|---|
||**%**|%|
|Equities|**32.48**|40.80|
|Diversifed|growth fund and LDI
**64.15**|58.30|
|Cash|**3.37**|0.90|
|**Total**|**100.00**|100.00|
Annual Report and Group Financial Statements 2020-21 **125**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **25. Post employment benefits (continued) SHG Scheme 2017 (continued)**
|**25. Post employment benefts (continued)**
**SHG Scheme 2017 (continued)**||||
|---|---|---|---|
|**Net defned beneft liability**||**2021**
**£000s**|2020
£000s|
|Fair value of scheme assets||**32,911**|23,574|
|Present value of defned beneft obligation||**(39,450)**|(26,488)|
|**Defned beneft liability recognised in statement of fnancialposition**||**(6,539)**|(2,914)|
|||||
|||**2021**|2020|
|**Total expense recognised in statement of comprehensive income**||**£000s**|£000s|
|Current service cost||**177**|138|
|Past service cost||**–**|–|
|Administration expenses||**22**|170|
|Net interest cost||**75**|78|
|**Total recognised in the statement of comprehensive income**||**274**|386|
|||||
||Assets|Liabilities|**Total**|
|**Reconciliation of scheme assets and liabilities**|£000s|£000s|**£000s**|
|**At 1 April 2020**|23,574|(26,488)|**(2,914)**|
|Benefts paid|(1,321)|1,321|**–**|
|Current service cost|–|(177)|**(177)**|
|Interest income/(cost)|662|(737)|**(75)**|
|Administration expenses|(7)|(15)|**(22)**|
|Employer contributions|733|–|**733**|
|Employee contributions|94|(94)|**–**|
|Acquired from Crown Simmons|5,275|(6,010)|**(735)**|
|Actuarial losses|–|(7,250)|**(7,250)**|
|Return on scheme assets excludinginterest income|3,901|–|**3,901**|
|**At 31 March 2021**|32,911|(39,450)|**(6,539)**|
## **The Isle of Wight Council Pension Scheme**
The Group participates in a pension scheme providing benefits based on final pensionable pay: The Isle of Wight Pension Scheme. The scheme is funded by the payment of contributions to a pension fund, which is administered by the Isle of Wight Council. The Group has agreed a funding plan with the trustee, whereby ordinary contributions are made into the scheme based on a percentage of active employees’ salary. Additional contributions are agreed to reduce the funding deficit where necessary.
A comprehensive actuarial valuation of the pension scheme, using the projected unit credit method, was carried out at 31 March 2019 by a qualified independent actuary.
It has been agreed that an employer contribution rate of 31.6% of pensionable pay plus an additional amount of £350,000 will apply for 2021-22 (2020-21: 28.3% plus £350,000).
The major assumptions used in this valuation were:
||**2021**|2020|
|---|---|---|
|**Actuarial assumptions**|**% pa**|% pa|
|Pension increase rate|**2.85**|2.00|
|Rate of increase in salaries|**3.65**|2.80|
|Discount rate|**1.95**|2.30|
|Infation assumption – RPI|**3.00**|2.90|
|Infation assumption – CPI|**2.85**|2.00|
**126 Southern Housing Group**
|**25. Post employment benefts (continued)**
**The Isle of Wight Council Pension Scheme (continued)**||||OVERVIEW|
|---|---|---|---|---|
|**Mortality assumptions**||Male|Female||
|Current pensioner aged 65||21.90|24.20||
|Future retiree upon reaching65||22.90|25.90||
|The major categories of scheme assets as a percentage of total scheme assets are|||||
|||**2021**|2020||
|||**%**|%||
|Equities
Property
Bonds
Cash
**Total**||**74.00**
**5.00**
**20.00**
**1.00**
**100.00**|62.00
6.00
30.00
2.00
100.00|STRATEGIC REVIEW|
||||||
|**Net defned beneft liability**||**2021**
**£000s**|2020
£000s||
|Fair value of scheme assets||**6,617**|5,545||
|Present value of defned beneft obligation
**Defned beneft liability recognised in statement of fnancialposition**
**Total expense recognised in statement of comprehensive income**
Current service cost
Net interest cost||**(8,153)**
**(1,536)**
**2021**
**£000s**
**44**
**35**|(7,278)
(1,733)
2020
£000s
74
46|GOVERNANCE REPORT|
|**Total recognised in statement of other comprehensive income**||**79**|120||
||||||
||Assets|Liabilities|**Total**||
|**Reconciliation of scheme assets and liabilities**|£000s|£000s|**£000s**||
|**At 1 April 2020**
Benefts paid
Current service cost
Interest income/(cost)
Employer contributions
Employee contributions
Actuarial losses|5,545
(385)
–
128
386
8
–|(7,278)
385
(44)
(163)
–
(8)
(1,045)|**(1,733)**
**–**
**(44)**
**(35)**
**386**
**–**
**(1,045)**|**FINANCIAL STATEMENTS**|
|Return on scheme assets excludinginterest income|935|–|**935**||
|**At 31 March 2021**|6,617|(8,153)|**(1,536)**||
|**Defned contribution schemes**
The amount recognised as an expense for the year in respect of the defned contribution scheme was:
£1,893,129 (2020: £1,706,385)
**26. Legislative provisions**
Southern Housin Grou Limited is incororated under the Co-oerative and Communit Beneft Societ|ies Act 2|14||OTHER INFORMATION|
Southern Housing Group Limited is incorporated under the Co-operative and Community Benefit Societies Act 2014 (Registered Number IP31055R) and registered with the Regulator of Social Housing (Registered Number L4628).
Annual Report and Group Financial Statements 2020-21 **127**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **27. Group organisations**
Southern Housing Group Limited is the ultimate parent undertaking and controlling party and is required by statute to prepare group financial statements for the following organisations included in these financial statements. All the undertakings are incorporated in England and Wales:
|
England and Wales:|||||
|---|---|---|---|---|
|Name|Legal status|Regulator|Nature of business|Interest held by parent (SHGL)|
|Southern Housing Group
Limited|Co-operative and
Community Beneft|Registered Provider
Number: L4628|Provision of housing and
accommodation to the||
||Societies Act 2014||disadvantaged||
||Number IP31055R||||
|Southern Home
Ownership Limited|Co-operative and
Community Beneft|Registered Provider
Number: LH1662|Development and
management|100% shares|
||Societies Act 2014||of properties||
||Number IP18521R||||
|Southern Space Limited|Companies Act 2006||Vehicle for the one third|100% shares|
||Number 05437850||share in Triathlon Homes||
||||LLP||
|Southern Development|Companies Act 2006||Provision of development|100% shares|
|Services Limited|Number 05400187||services to other group||
||||companies||
|Spruce Homes Limited|Companies Act 2006||Provision of housing for|100% shares|
||Number 10181074||private rent||
|Southern Housing|Companies Act 2006||Provides property|100% shares|
|Construction Limited|Number 10181046||construction services||
|Rosemary Simmons
Memorial Housing|Co-operative and
Community Beneft|Registered Provider
Number: LH1026|Provision of housing and
accommodation to the|100% shares|
|Association Limited|Societies Act 2014||disadvantaged||
|trading as Crown|Number IP15355R||||
|Simmons Housing|||||
|The Fellowship Houses|Charities Act 2011|Registered Provider|Provision of housing and|Crown Simmons Housing|
|Trust|Charity Number 205786|Number: LH1821|accommodation to the|is Corporate trustee|
||||disadvantaged||
|Hewitt Homes|Charities Act 2011|Registered Provider|Provision of housing and|Crown Simmons Housing|
||Charity Number 235827|Number: LH1856|accommodation to the|is Corporate trustee|
||||disadvantaged||
|Samuel Lewis Foundation|Charitable Endowment.|Charity Commission|Provision of housing and|Corporate trustee|
||Charity Number 206611||accommodation to the||
||||disadvantaged||
||||(see note 29)||
|Affnity Housing Services|Jointly controlled||Joint venture with Abri|50% partnership capital|
|(Reading)|operation||Group||
|Affnity (Reading)
Holdings Limited|Companies Act 2006
Number 04851135||Joint venture with Abri
Group|33.3% share directly held
and 16.67% via Affnity|
|||||HousingServices (Reading)|
|Triathlon Homes LLP|The Limited Liability||Joint venture entity with|33% partnership interest|
||Partnership Act 2000||First Base 4 Stratford LLP|via Southern Space Limited|
||||and East Place Limited||
**128 Southern Housing Group**
## **28. Related parties**
|||||
|---|---|---|---|
|**28. Related parties**
Intra-group transactions for Southern Housing Group Limited with non-regulated group members are as follows:|||OVERVIEW|
||**2021**|2020||
|**Payments received by Southern Housing Group Limited**|**£000s**|£000s||
|Administration support and development costs recharged to Southern Space Limited, Southern Development
Services Limited, Spruce Homes Limited and Southern Housing Construction Limited|**2,412**|1,971||
|Loan interest from Southern Space Limited, Spruce Homes Limited and Southern Housing Construction Limited|**53**|90||
|Director’s services and income received from Affnity Housing Services (Reading)|**150**|161||
|Provision of administrative services to Triathlon Homes LLP|**1,469**|588||
|Gift aid from Southern Space Limited and Southern Development Services Limited|**143**|1,472||
|**Total**
**Payments made by Southern Housing Group Limited**
Development costs paid to Southern Development Services Limited|**4,227**
**2021**
**£000s**
**–**|4,282
2020
£000s
6,260|STRATEGIC REVIEW|
|Management costs paid to Spruce Homes Limited|**139**|94||
|Propertyequity purchasepaid to Southern Space Limited|**–**|453||
|**Total**|**139**|6,807||
|||||
||**2021**|2020||
|**Assets**
Intercompany debtor due from Southern Space Limited, Spruce Homes Limited and Southern Housing
Construction Limited to Southern Housing Group Limited
Redeemable loan notes due from AffnityReading(Holdings) Limited|**£000s**
**2,438**
**2,146**
**2021**|£000s
1,874
1,968
2020|GOVERNANCE REPORT|
|**Liabilities**|**£000s**|£000s||
|Intercompany creditor due from Southern Housing Group Limited to Southern Space Limited, Southern||||
|Development Services Limited and Southern HousingConstruction Limited|**990**|943||
|Intra-group transactions for Southern Home Ownership with non-regulated group members are as follows:
Purchase of developments from Southern Space Limited
Management income from Spruce Homes Limited
Development costs paid to Southern Development Services Limited and Southern Housing Construction Limited
Intercompany debtor due from Spruce Homes Limited|**2021**
**£000s**
**–**
**377**
**3,249**
**26**|2020
£000s
1,566
450
3,296
40|**FINANCIAL STATEMENTS**|
|Intercompany creditor due to Southern Space Limited, Southern Development Services Limited and Southern||||
|HousingConstruction Limited|**1,087**|561||
Payments totalling £1,406 (2020: £1,352) were made to Southern Housing Group Limited by Simone Buckley, a Board member who was a leaseholder during the year. The terms of the lease are on the same basis as for other tenants and on an arm’s length basis.
As Southern Housing Construction Limited has net current liabilities, the Association has provided a letter confirming its intention to provide financial support if required for this entity for a period of at least 18 months from 1 April 2021.
Annual Report and Group Financial Statements 2020-21 **129**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **29. Samuel Lewis Foundation**
The Samuel Lewis Foundation is a separate charity with Southern Housing Group Limited as its trustee. Permanent endowment funds comprise the following resources which have been made available and which the trustees are legally required to retain or invest for specific charitable purposes. As these are permanent funds the trustees have no power to convert them into income and apply them as such. The fund balances include funds transferred from The Women’s Housing Trust. These balances are included in the parent association, Southern Housing Group Limited. This disclosure is given for reporting purposes to the Charity Commission.
Expenditure on letting activities comprise certain specific identifiable costs and overheads which have been apportioned on a consistent basis to the endowed properties.
Dalmeny Avenue was regenerated in 2018 with all sales proceeds being ringfenced for the specific charitable purposes of the Samuel Lewis Foundation.
|
Lewis Foundation.||||
|---|---|---|---|
||Date of|Original cost|Number of|
||acquisition|£000s|units|
|Liverpool Road|1910|324|247|
|Jubilee Cottages|1935|707|28|
|Palliser Road|1927|973|57|
|Beech House|1936|701|16|
|Fund balances are represented by:|||
|---|---|---|
||**2021**|2020|
||**£000s**|£000s|
|Property, plant and equipment|**14,005**|14,363|
|Cash|**15,285**|15,285|
|Investmentproperties|**6,910**|6,900|
|**Total assets less current liabilities**|**36,200**|36,548|
|Creditors: amounts falling due after more than one year|||
|Social housingand othergrants|**(7,701)**|(7,701)|
|**Total net assets**|**28,499**|28,847|
|**Net income from permanent endowed assets**|||
|Income from lettings|**1,802**|1,851|
|Less expenditure on lettingactivities|**(839)**|(651)|
|Surplus on letting activities|**963**|1,200|
|Loss on revaluation of investmentproperties|**(310)**|(300)|
||**653**|900|
## **30. Contingent liabilities**
The Group has grant attributable to properties acquired from housing associations that were purchased at fair value, measured at Existing Use Value – Social Housing (EUV-SH) or through a competitive bidding process. These properties included original government grant funding of £61,001k (2020: £46,204k) which the Group has an obligation to recycle in accordance with the original grant funding terms and conditions. In accordance with the SORP, these amounts are disclosed as a contingent liability. The Group is responsible for the recycling of the grant in the event of the housing properties being disposed.
At 31 March 2021 the value of cumulative amortised grant which would require to be recognised as a liability if the properties funded were disposed of or ceased to be used for social housing purposes was £168,541k (2020: £143,123k).
**130 Southern Housing Group**
## **31. Business combination**
On 1 April 2020 Rosemary Simmons Memorial Housing Association Limited trading as Crown Simmons Housing became a subsidiary of Southern Housing Group Limited. Acquisition accounting has been applied to the business combination and a fair value assessment was completed for the assets acquired, liabilities and contingent liabilities assumed of Crown Simmons Housing. All housing properties held for letting were fair valued externally by Copping Joyce, qualified RICS Chartered Surveyors. The valuation model used for market rent properties was the MV-T model while remaining housing properties were valued using the EUV-SH model. The key areas impacted by the fair valuation were mainly housing properties as the carrying value of all remaining assets acquired and liabilities assumed were considered to approximate their fair values at the acquisition date or where applicable, the measurement principles prescribed in Section 28 of FRS 102. This resulted in a fair value gain of £58,844k; since the business combination is in substance a gift, this gain was recognised in the consolidated statement of comprehensive income.
The assets and liabilities recognised as a result of the acquisition are as follows:
|The assets and liabilities recognised as a result of the acquisition are as follows:||
|---|---|
|**Consideration for acquisition**|**Group**
**2021**
**£000s**
**–**|
|**Net assets acquired at fair value:**||
|Housing properties held for letting|**61,510**|
|Housing properties under construction|**2,571**|
|Other fxed assets|**35**|
|Unlisted investments – FHT endowment
Stock – property under construction
Trade debtors
Other debtors and prepayments
Cash and cash equivalents|**138**
**316**
**107**
**96**
**7,612**|
|Accruals and deferred income|**(896)**|
|Other creditors|**(995)**|
|Housing loans|**(10,876)**|
|Recycled capital grant fund (RCGF)|**(39)**|
|Pension reserve
**Gain on acquisition**|**(735)**
**58,844**
**58,844**|
Contingent liabilities of £18,884k, being cumulative amortised and unamortised grants, were assumed by the Group on the acquisition of Crown Simmons Housing. The Group assessed that the likelihood of any outflows arising from settlement of these contingent liabilities is remote and their fair value was considered immaterial. Hence, no amounts were assigned to contingent liabilities in the determination of gain on acquisition.
As a result of the market impacts of Novel Coronavirus (Covid-19), the valuation of housing properties is reported on the basis of material valuation uncertainty as per VPS 3 and VPGA 10 of the RICS Red Book Global. This reflects the fact that at the valuation date, the valuers consider that they can attach less weight to previous market evidence for comparison purposes to inform opinions of value. The inclusion of a material valuation uncertainty declaration does not mean that the valuation cannot be relied upon. Rather, it indicates that less certainty and a higher degree of caution should be attached to the valuation than would normally be the case.
Annual Report and Group Financial Statements 2020-21 **131**
**Notes to the financial statements** For the year ended 31 March 2021 (continued)
## **32. Prior year adjustment**
During the year a review of the Group’s fixed asset register identified a certain number of housing property assets which were being depreciated incorrectly or were no longer owned by the Association/Group. This error was identified by management in the current year and accordingly the opening position for the comparative period and the prior year comparatives have been restated as shown below.
## **Consolidated Statement of Comprehensive Income**
## **(extract)**
|**Consolidated Statement of Comprehensive Income**
**(extract)**||||
|---|---|---|---|
||**As presented**|Fixed assets|**Restated**|
||**Group**|restatement|**Group**|
||**2020**|2020|**2020**|
||**£000s**|£000s|**£000s**|
|Cost of sales|**(47,315)**|13|**(47,302)**|
|**Gross proft**|**189,531**|13|**189,544**|
|Operating costs|**(145,716)**|164|**(145,552)**|
|Gain on disposal of fxed assets|**24,049**|(3)|**24,046**|
|**Operating surplus**|**61,999**|174|**62,173**|
|**Surplus before tax**|**23,618**|174|**23,792**|
|Taxation|**(337)**|42|**(295)**|
|**Surplus for theyear**|**23,281**|216|**23,497**|
|**Total comprehensive income for theyear**|**23,464**|216|**23,680**|
## **Statement of Comprehensive Income**
## **(extract)**
|**Statement of Comprehensive Income**
**(extract)**|||||
|---|---|---|---|---|
||**As presented**|Fixed assets||**Restated**|
||**Association**|restatement||**Association**|
||**2020**||2020|**2020**|
||**£000s**||£000s|**£000s**|
|Operating costs|**(147,122)**||164|**(146,958)**|
|Gain on disposal of fxed assets|**23,779**||(3)|**23,776**|
|Operating surplus|**47,419**||161|**47,580**|
|Surplus before tax|**28,649**||161|**28,810**|
|Surplus for theyear|**28,649**||161|**28,810**|
|**Total comprehensive income for theyear**|**28,832**||161|**28,993**|
The opening reserves as at 1 April 2019 reduced by £9.7m following correction of the above errors.
**132 Southern Housing Group**
## **32. Prior year adjustment (continued) Consolidated Statement of Financial Position**
## **(extract)**
|**32. Prior year adjustment (continued)**
**Consolidated Statement of Financial Position**
**(extract)**|||
|---|---|---|
|**As presented**|Increase/|**Restated**|
|**Group**|(decrease)|**Group**|
|**2020**|2020|**2020**|
|**£000s**|£000s|**£000s**|
|**Fixed assets**
Cost – property plant and equipment
**2,292,791**
Depreciation – property, plant and equipment
**(234,664)**
Depreciation – other fxed assets
**(31,421)**
**Property, plant and equipment**
**2,111,976**
**Total fxed assets**
**2,274,308**
Accruals and deferred income
**(28,984)**
Corporation tax
**(1,263)**
Grant repayable
**(2,873)**|(2,699)
(6,596)
(27)
(9,322)
(9,322)
14
42
(1,174)|**2,290,092**
**(241,260)**
**(31,448)**
**2,102,654**
**2,264,986**
**(28,970)**
**(1,221)**
**(4,047)**|
|**Creditors: amounts falling due within oneyear**
**(111,861)**|(1,118)|**(112,979)**|
|**Net current assets**
**82,658**|(1,118)|**81,540**|
|**Total assets less current liabilities**
**2,356,966**|(10,440)|**2,346,526**|
|**Deferred income**
**(763,589)**
**Creditors: amounts falling due after more than oneyear**
**(1,700,968)**
**Total net assets**
**643,924**
**Total reserves at 31 March 2020**
**643,924**
**Total reserves at 31 March 2019**
**620,460**|972
972
(9,468)
(9,468)
(9,684)|**(762,617)**
**(1,699,996)**
**634,456**
**634,456**
**610,776**|
## **Statement of Financial Position**
**(extract)**
|**Statement of Financial Position**
**(extract)**|||
|---|---|---|
|**As presented**|Increase/|**Restated**|
|**Association**
**2020**
**£000s**
**Fixed assets**
Cost – property plant and equipment
**2,145,208**
Depreciation – property, plant and equipment
**(234,490)**
Depreciation – other fxed assets
**(31,421)**|(decrease)
2020
£000s
(2,699)
(6,596)
(27)|**Association**
**2020**
**£000s**
**2,142,509**
**(241,086)**
**(31,448)**|
|**Property, plant and equipment**
**1,964,567**|(9,322)|**1,955,245**|
|**Total fxed assets**
**2,110,039**|(9,322)|**2,100,717**|
|Accruals and deferred income
**(22,108)**
Corporation tax
**–**
Grant repayable
**(2,873)**
**Creditors: amounts falling due within oneyear**
**(103,660)**
**Net current assets**
**177,037**
**Total assets less current liabilities**
**2,287,076**|1
–
(1,174)
(1,173)
(1,173)
(10,495)|**(22,107)**
**–**
**(4,047)**
**(104,833)**
**175,864**
**2,276,581**|
|**Deferred income**
**(751,060)**|972|**(750,088)**|
|**Creditors: amounts falling due after more than oneyear**
**(1,688,406)**|972|**(1,687,434)**|
|**Total net assets**
**587,596**|(9,523)|**578,073**|
|**Total reserves at 31 March 2020**
**587,596**|(9,523)|**578,073**|
|**Total reserves at 31 March 2019**
**558,764**|(9,684)|**549,080**|
Annual Report and Group Financial Statements 2020-21 **133**
134 Southern Housing Group
# **Other information**
Principal advisors, Secretary and registered office
**136**
Annual Report and Group Financial Statements 2020-21 **135**
**Principal advisors, Secretary and registered office**
## **External auditors**
## **PricewaterhouseCoopers LLP**
**Chartered accountants and statutory auditors** 1 Embankment Place London WC2N 6RH
## **Principal bankers**
## **National Westminster Bank PLC**
## **Corporate banking**
Second Floor, County Gate 2 Staceys Street Maidstone Kent ME14 1ST
## **Secretary and registered office**
## **Noreen Adams**
**Group Company Secretary** Southern Housing Group Fleet House 59-61 Clerkenwell Road London EC1M 5LA
**136 Southern Housing Group**
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## **Contact us**
**Communications and External Affairs** Southern Housing Group Fleet House, 59-61 Clerkenwell Road London EC1M 5LA
Email: communications@shgroup.org.uk Follow us at: @SHGroupUK