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2024-03-31-accounts

Annual Report 2023-24 SOUTHERN HOUSING

Highlights

Southern Housing Annual Report 2023-24

3

Contents

01
02
03
04		 HIGHLIGHTS
Opening Statements
6
Highlights
9
About Southern Housing
11
STRATEGIC REPORT
Our Business Model
15
Stakeholders and Engagement
16
Strategic Plan
20
Financial Review
29
Value for Money
36
Financial Planning and Treasury Management
40
Risk Management
42
LEADERSHIP AND GOVERNANCE
The Board
51
Committees
54
Residents
55
Executive Team
59
Compliance
61
FINANCIAL STATEMENTS
Independent Auditor’s Report to the Members
71
Statement of Comprehensive Income
81
Statement of Financial Position
82
Statement of Changes in Reserves
83
Consolidated Statement of Cash Flows
84
Analysis of changes in Net Debt
85
Notes to the Financial Statements
86
Other Company Information
132

01 HIGHLIGHTS STRATEGIC REPORT[02]

03 LEADERSHIP AND GOVERNANCE

04 FINANCIAL STATEMENTS

Opening Statements

Highlights

About Southern Housing

Southern Housing Annual Report 2023-24

Highlights 6

From Chair of the Board

Southern Housing was built on a shared commitment of two organisations to building homes and communities that people feel proud to live in. We wanted to create a resilient business that enhanced the service offer for residents by leveraging our scale and density. To that end, we’ve been working tirelessly to integrate our systems and our workforce and to improve processes.

We began our journey towards this goal in very turbulent times. The last year, our first full year as a merged business, has rightly seen increased scrutiny on the quality of services we provide to our residents. We recognise we still have some way to go, and we’re truly sorry to all residents who’ve experienced service failures and who we’ve let down. We’re using the learnings from the Housing Ombudsman’s recently published investigation report together with our longstanding commitment to resident governance to drive improvements. More information on our response to the report is available on our website.

The Board is very grateful for the engagement our Residents Strategy Group (RSG) provides alongside all involved residents who are helping improve our services as we continue to integrate the two legacy businesses. RSG has in the last year carried out a number of scrutiny projects, including one on damp and mould, and reported findings and recommendations to the Board.

I’m delighted our commitment to resident governance and strong resident engagement have been recognised with one of our Resident Ambassadors being appointed to the National Housing Federation’s (NHF) Tenant Advisory Panel (TAP), a policy development and consultation sounding board for the NHF to promote sector best practice in resident governance and engagement. Our Chair of RSG has been appointed to the Tpas Board and one of our resident board members has been elected to chair the G15 Residents’ Group. Three of our residents have also been appointed to the Housing Ombudsman’s Residents’ Panel. These external networks enable Southern Housing to input into policy development at a national level.

We’ve seen our annual surplus depressed this year as we feel the impact of working in such a challenging economic and operational environment. Board has had to take the very tough decision of scaling right back our development commitments which enables us to significantly increase investment in existing homes and to increase the resources available in a number of key frontline services.

Despite a difficult year I’m confident that with the dedication and commitment of the Board, residents and colleagues we have at Southern Housing we’ll achieve the standard of services residents expect from us.

Sir Peter Dixon Chair of Southern Housing Board

Southern Housing Annual Report 2023-24

Highlights 7

From Chair of Resident Strate Grou gy p

A year on from the merger, members of our RSG, Board, Executive Team and operational colleagues had their first away day. It was a rewarding day and a good opportunity to build our ‘one’ Southern Housing Team, and to understand where best to focus our attention in 2024/25. For me, as a resident being able to work alongside the Board at such an event is testament to the commitment Southern Housing has to truly embracing resident involvement.

I’m in the privileged position of being able to see the immense amount of work which has gone on to ensure Southern Housing is governed and managed in a responsible and effective way. Many of us involved at Southern Housing wouldn’t dispute the first full year of merger has been eventful with many challenges faced along the way both by us and the sector.

Having spent much of the last year designing and then recruiting to a new resident governance structure I’m delighted we have residents involved at every level of our organisation – from Board supporting our strategic direction through to local groups looking at day to day service delivery.

In 2024, we’ll be developing our new Resident Involvement Strategy. It’s an important moment for resident voices in the social housing sector, increased external scrutiny along with internal challenges means that delivering a human-centred service is a significant priority.

Following a very successful recruitment campaign (receiving nearly a thousand applicants), we’ve doubled the number of involved residents to over 100, showing residents are as keen as ever in wanting to be involved. We improved the diversity of our involved residents which underpins our commitment to having a broad and representative customer base, 59% of our involved residents are female, 36% are from an ethnic minority background, 34% are living with a disability, 12% are LGBTQ and ages range from 24 to 71.

Billy Brown Chair of Resident Strategy Group

Our Regional, Scrutiny and Service Panels have been instrumental in shaping and influencing a range of policies and strategies for Southern Housing, including antisocial behaviour, damp and mould, fire safety and sustainability. We are using our lived experience to bring to life for colleagues the impact their decisions have on residents’ lives.

Southern Housing Annual Report 2023-24

Highlights 8

From Chief Executive

Our first full year since merger has been focused on integrating systems and teams. We’re on track to be mostly integrated by April 2025, enabling us to realise merger benefits and deliver services to a consistently high standard.

We report an annual surplus before fair value movements of £3 million for 2023/24. This is below expectations and the £21 million surplus reported in the half year trading statement but in line with our full year trading statement. Our results have been put under pressure for several reasons, notably a difficult contractor market which has delayed completion of new schemes impacting anticipated rent and sales income. In addition, with a number of contractors going into administration we’ve reassessed several schemes, writing off abortive costs and increasing the impairment provision. We’ve increased resourcing in a number of front-line teams including compliance, repairs and maintenance and complaints and we’ve created a dedicated team to tackle damp and mould.

Despite one-off charges, our financial strength has enabled us to significantly increase investment in our homes. In 2023/24 we spent £247 million on our existing homes – a 33% increase on the previous year. We’ve further increased investment in 2024/25 by £23 million. Turnover totalled £609 million of which only 7% was generated from open market and first tranche shared ownership sales.

We established Southern Housing with the aim of creating a more resilient organisation and that is clearly happening, we’ve carefully navigated the twin pressures of high inflation and interest rates. We have a strong balance sheet with £7 billion assets at cost. We generated £207 million in year from our operations and held £109 million cash at 31 March 2024. We continue to enjoy significant headroom against banking covenants, with modest gearing, low refinancing risk and strong liquidity together with c.27,000 homes unencumbered and chargeable. 89% of our debt is fixed and we have limited near term refinancing risk with 79% of debt due for repayment in over 5 years.

We’re keenly aware of the risks and opportunities we face in relation to Government policy on rents, grant, housing standards and regulation. We have necessarily refocused our capacity into increased investment in our homes and services. We have the balance sheet strength and operational flexibility to continue to respond appropriately as regulation changes. Looking to the future the Southern Housing Board has taken a decision to stop making commitments on new developments enabling us to significantly derisk the business and focus on core social housing activities. We’ll complete integration during 2025 enabling us to realise merger benefits and deliver services to a consistently higher standard.

Paul Hackett CBE Chief Executive Southern Housing

Southern Housing Annual Report 2023-24Annual Report 2023-24

Highlights 9

Highlights For the year to 31 March 2024 (31 March 2023)

Financials

Turnover £609m (£642m)

Social Housing cost per unit** (£5,544) £6,844 Total assets £7bn (£7bn) Moody’s Credit Rating stable A3 outlook

Operating surplus £108m (£136m) Operating margin* 12% (14%)

Current arrears** 5% (5%) Fitch Credit Rating A[stable]

Surplus before fair value movements £3m (£40m)

New sales receipts £44m (£127m) Total debt including bonds £3bn (£3bn) Interim judgement G2 / V2

Develo ment & Investment p

New home starts 348 (952) Investment in existing homes £247m (£186m) Total homes owned and managed (78,760) 79,820

New homes spend £257m (£269m) New homes in contract at 31 March 2024 (3,936) 3,256 Capital commitments £531m (£665m)

  • Our operating margin is adjusted to exclude surplus on housing property disposals

(£32 million) but includes surplus on first tranche shared ownership (£0.5 million) and market sales loss (£3.4 million). Our internal target operating margin excludes all sales

New homes completed (including Joint Venture and market sales) 776 (1,089)

People into jobs and training (2,081) 1,592

** Calculated using Regulator of Social Housing (RSH) definitions

Southern Housing Annual Report 2023-24Annual Report 2023-24

Highlights 10

O erational p

Satisfied with overall service 67% (72%)

Satisfaction with repair service 68% (66%)

Satisfied with time taken to complete most recent repair 63% (61%)

Agree we treat residents fairly and with respect 81% (84%)

Satisfied we provide a safe home 78% (81%)

Satisfied we keep residents informed 78% (82%)

Satisfied we provide a well maintained home

73% (75%)

Satisfied with our approach to handling anti-social behaviour 68% (70%)

Homes meeting Decent Homes Standard 99.7% (98.2%)

Satisfied we keep communal areas clean and well maintained

69% (73%)

Vacant homes available for letting 1% (1%)

EPC band C and above 74% (73%)

Satisfied we listen to residents’ views and act upon them 63% (68%)

Collea ues g

Satisfaction with Southern Housing as an employer 81% (N/A)

Average number of sickness days per employee (8 days) 8 days

Colleagues leaving for a voluntary reason 11% (14%)

Southern Housing Annual Report 2023-24

Highlights 11

About Southern Housin g

Southern Housing, formed in 2022 following a merger, has a history stretching back to early 1900s of helping those in housing need and providing affordable homes with residents at the heart of all we do. At every level of the business our residents collaborate with us as one team to co-design and scrutinise key activities so we can deliver brilliant services and improve value for money. We own over 79,000 homes, providing over 167,000 residents across London, the South East, the Midlands and the Isle of Wight with access to affordable housing.

Now more than ever it’s essential we provide safe, affordable homes enabling people to flourish and live in a secure environment. We’ve continued to build new homes to help solve the housing crisis completing 776 in 2023/24, working with residents, local authorities and partners to create safe and sustainable homes and communities.

The economic environment is challenging, high cost inflation and increased interest rates are having an impact on many people’s lives. Our social impact statement underpins our corporate objective of creating jobs and training. We’re focusing our resources on providing support programmes that match residents’ skills and talents to job opportunities. During 2023/24 we supported 1,592 people into jobs or training. Alongside our social impact team, our charity, Fresh Visions, has for many years helped transform the lives of hundreds of children, young people and adults facing extreme poverty, domestic abuse, lack of education and social exclusion.

Our markets, external environment and future prospects

We’ve completed the first full year of our three year strategic plan 2023-2026. It sets out our ambitions and our vision to create communities where everyone has a safe home, in a place where they’re proud to live. Improving customer service is our immediate priority. We’re making good progress to integrate systems and people since merging in December 2022. People integration is due to complete by December 2024 and systems integration during 2025.

The Southern Housing Board has recently taken the very difficult decision to reduce new development commitments, enabling us to prioritise investment in our existing homes. Stock condition data and agreed standards are informing the scale and scope of our investment programme. Part of our investment programme for existing homes includes scaling up our energy efficiency retrofit. We, however, recognise the ongoing need to provide new affordable homes and so will be working in partnership to deliver affordable housing with local authorities.

Southern Housing Annual Report 2023-24

Highlights 12

Southern Housing has more than 79,000 homes and over 167,000 residents

location-pin London North location-pin South and Isle of Wight location-pin London South location-pin Sussex location-pin Midlands location-pin Kent and Essex

Homes in management and/or owned

General Needs 65%
Shared Ownership 12%
Supported, Care & HOPs 9%
Leasehold 8%
Key workers 2%
Non Social Housing 2%
Temporary & Intermediate 2%

House building 35% of residents live in 65% of our residents live Houses or Bungalows in Flats/Maisonettes

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01 HIGHLIGHTS STRATEGIC REPORT[02]

03 LEADERSHIP AND GOVERNANCE

Our Business Model

Stakeholders and Engagement

04 FINANCIAL STATEMENTS

Strategic Plan

Financial Review

Value for Money

Financial Planning and Treasury Management

Risk management

Southern Housing Annual Report 2023-24

Strategic Report 15

Management presents its report incorporating the strategic report and audited consolidated financial statements for Southern Housing and its subsidiary undertakings for the year ended 31 March 2024. These consolidated accounts are also available on our website.

Our Business Model

Who we are

We’re one of the largest housing providers in the UK. Our core business, providing homes for people who need them, is founded on maintaining a strong social purpose. 96% of the group’s business (by income) is undertaken by Southern Housing, the charitable parent organisation. 98% of assets are also held by Southern Housing. New build activities are conducted through Lamborn Estates (market sales), Optivo Development Services, Southern Housing Construction Limited, Southern Home Ownership and Ink Development, a limited company jointly owned in which Southern Housing holds one share. A full list of the group subsidiaries and their activities are set out in note 31 to these financial statements.

Southern Housing has invested equity in its subsidiary companies. £1.7 million is invested in Spruce Homes, the investment is supported by the net assets of this subsidiary. £13,000 is invested in our finance company Optivo Finance Plc. The sum of equity investment in dormant companies, charities and registered providers is nominal at £3. We have one project specific company, Middlesex First Limited to which Southern Housing provides an equity loan of £7.8 million accounted for in intercompany debtors.

We’ve investments in three joint ventures ranging from 33% to 50% holding. Two are for the provision of management and / or maintenance services including investment in social housing assets and one is for the development of affordable and open market residential homes in Kent.

What we do

We work with residents, local authorities and partners to help meet housing need and to create safe, sustainable communities for our residents. Our core tenure is social rented housing. Through our work on social impact we aim to make a difference and work to support our residents and communities. Enhancing lives is key to our mission. Operating in some of the UK’s poorest neighbourhoods we adapt our activities and projects to meet local need and priorities. In 2023/24 we helped 1,592 people into jobs and training. Our work helps people to gain confidence and overcome significant barriers to securing work. We also work with our supply chain businesses to find jobs and opportunities to improve skills for our residents.

We use our existing housing portfolio to secure new funding to support our development ambitions. We started 348 new homes in 2023/24. Our new homes programme will see us build out schemes we already own to provide housing for rent (including affordable and social rent), shared ownership and open market sale. The majority will be in London and the South East with a small element in the Midlands.

How we generate our money and what we do with it

In 2023/24, 83% of our turnover came from rent and service charges and 7% from the sale of first tranche (shared ownership) and market sales properties. Our operations generated £207 million cash. This together with net funding of £226 million helped us to maintain a high level of investment back in to existing and new homes. At year end we had committed £531 million in capital investments on developments already in contract and have made a provision of £1 million for fire remediation works scheduled for 2024/25.

Southern Housing Annual Report 2023-24

Strategic Report 16

Our Stakeholders and En a ement g g

We’re committed to operating fairly, with integrity and respect for the opinions and perspectives of our stakeholders. Our primary stakeholders include our residents and service users, both current and future,

our partners in central and local Government, our colleagues, suppliers and investors and the wider communities in which we operate. A summary of our engagements with our stakeholders is outlined below.

RESIDENTS AND SERVICE USERS

Residents are at the heart of Southern Housing. At every level of the organisation our residents work alongside us from strategic decision making to day to day services. They influence our policies and strategies, scrutinise performance and help shape the services we deliver. We live in a very challenging world that is causing struggles for many people, so it is important we respond so we can be effective and meet the needs of our residents. Our Co-Creation Framework sets out how we involve residents in innovative and meaningful ways.

COLLEAGUES

Our colleagues are our greatest asset and critical to us delivering our mission. We are committed to delivering excellent services and providing homes for those who really need them. We recognise the scale and pace of change in our first year since merger has been very significant and at times disruptive. With a clear commitment to diversity and inclusion and having established strong values, we are establishing a culture of empowering colleagues and providing the right learning opportunities and working environment. Meaningful and regular engagement with our colleagues is critical to our ongoing success as are appropriate reward, honesty, dialogue and appraisal between employer and employee.

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Strategic Report

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INVESTORS/FUNDERS

We’re a not-for-profit organisation with charitable status. We access debt capital through lenders and investors to enable continued investment in our homes. Communicating effectively with stakeholders and providing them with relevant and timely information are essential for maintaining access to debt markets and competitive pricing.

SUPPLIERS

We work with numerous contractors and suppliers. They are an essential ingredient to enable us to deliver services and new homes, providing jobs and training opportunities for residents. Maintaining this two-way relationship is important.

NATIONAL AND LOCAL GOVERNMENT

We receive public money to help us provide more homes and services.

UNIVERSITY AND KEYWORKER NHS TRUST PARTNERS

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CARE AND SUPPORT ISLE OF WIGHT LOCAL AUTHORITY, CARE QUALITY COMMISSION (CQC) AND NHS TRUST PARTNERS

COMMUNITIES AND ENVIRONMENT

We support residents to save money on their bills, manage energy costs, improve their health and wellbeing and reduce environmental impact. We’re striving to reduce our environmental impact to help manage our costs and be a more responsible business. We’re investing in the quality, safety and environmental sustainability of our homes.

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Strategic Report 19

Tackling Anti Social Behaviour

We know the serious impact AntiSocial Behaviour (ASB) can have on our residents. After repairs, it’s the second biggest influence on resident satisfaction. It’s also one of the most challenging services we deliver and will take on new prominence through the Regulator’s new consumer standards. With this in mind, we’ve taken several actions to ensure we deliver the best possible ASB handling service.

We’ve created a new Corporate Lead-ASB role to deliver consistency and drive service improvement. We’re implementing best practice and learning from the Housing Ombudsman Spotlight reports. We’ve implemented over half of the recommendations from the Housing Ombudsman’s Spotlight report on noise. This included introducing a Good Neighbourhood Management procedure, which means we’ll intervene earlier to resolve issues between neighbours before tensions escalate into ASB.

We’ve co-created a Southern Housing ASB policy with residents, drawing upon their lived experiences, as well as learning and best practice from others tackling ASB. It’s another key step towards delivering consistency.

Our Service Improvement Team has recently started an ASB service review. As part of this, colleagues and residents will co-create a new Southern Housing ASB process and customer journey. We’ll use residents’ insights to better meet their needs, manage expectations and improve satisfaction. This review will help us develop an improved ASB case management system by the end of 2024. It will deliver greater compliance with procedure, enhanced quality assurance and better performance reporting. We use legal action as a last resort and have an in-house Legal Team to assist with advice as well as to progress cases for court action.

A recent benchmarking exercise with similar organisations revealed we had the highest satisfaction with ASB handling among our peers in the first half of the year.

Southern Housing Financial Statements 2023-24Southern Housing Annual Report 2023-24

Strategic Report

20

Strate ic Plan 2023–26 g

Our Vision

Our vision is to create communities where everyone has a safe home in a place where they’re proud to live. Residents are at the heart of our services, and we use our size to influence positive change in the areas where we operate.

Our HEART Values

Honest

Efficient Accountable Respectful Trustworthy

Our Social Purpose

Social Value

We seek to drive the most social impact in everything we do.

Not for profit

We reinvest surpluses into improving residents’ homes, neighbourhoods, services, building new homes to reduce housing need.

Resident centred

We work with residents to shape services and we design service around residents.

Sustainable

We work hard to reduce the climate impact in all our work and services.

Inclusive

We recognise diversity as a strength and seek to harness this, creating workplaces and communities where everyone can thrive.

Fair and ethical

Value driven in the way the organisation works and what it expects from suppliers.

2023/24 was the first year of our three year strategic plan. We use a suite of Key Performance Indicators (KPIs) to track progress against our seven strategic objectives throughout the year and we review these annually.

From April 2023 all housing associations implemented the new regulatory Tenant Satisfaction Measures (TSMs).

For 2024/25 we’ve introduced new KPIs relating to complaints, compliance with the Decent Home Standard, financial performance and satisfaction for low cost home ownership. We’ve removed three KPIs from the strategic KPI reporting; two because they are TSMs closely tracked by other TSMs already included in our suite of KPIs and ‘New Starts’ given our focus has switched away from taking on new commitments and moved to completing existing schemes.

We’ve made strong progress over the last year in simplifying and integrating our business and more progress will be made through 2024/25.

Next year we will be benchmarking our TSM data against our G15 peer group. For now we are using our 2023/24 performance as our baseline with the target being year on year improvement.

KPIs that align with TSMs in the following section will be denoted with this icon:

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21

Objective 1

Great customer experience

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
Year on year
% Satisfied with overall service increase 67% 75% 72%
% Satisfied with repairs service Year on year 68% 75% 66%
over the last 12 months increase
Satisfaction with overall service Year on year
New New
experience (LCHO) increase
Number of repair complaints
received as a % of completed 1.3% New New
reactive repairs
% Satisfied with time taken to N/A 63% 65% 61%
complete most recent repair
----- End of picture text -----

Overall satisfaction is a key indicator of customer service, as is having an efficient and effective repairs service. We recognise some of our services are not reaching the levels we, or our residents, expect, to ensure focus is maintained to improve services Board has added a new strategic KPI for complaints linking with our repairs service. As part of our work to improve we’ve significantly increased resources in both areas of repairs and maintenance and complaint handling. We’ve also developed a new process for handling complaints.

Objective 2

Listen and act on residents’ views

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
% Satisfied we listen to residents’ Year on year 63% 68% 68%
views and act upon them increase
% Satisfied we keep residents Year on year 78% 83% 82%
informed increase
----- End of picture text -----

Focusing on these KPIs help us to ensure our services are shaped around residents to create improved experiences and better value.

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Strategic Report 22

Objective 3

Safe sustainable homes in good repair

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
% Satisfied we provide a safe home Year on year 78% 85% 81%
increase
% Satisfied we provide a well Year on year 73% 80% 75%
maintained home increase
% Homes meeting EPC C or above 75% 74% 74% 74%
% Homes meeting Decent Homes
100% 99.7% NEW 98.2%
Standard
----- End of picture text -----

These KPIs help us measure whether our homes are safe and energy efficient. We’re on track with meeting our EPC targets and have increased repairs and maintenance investment in our homes.

Objective 4

Neighbourhoods where residents are proud to live

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
% Satisfied we keep communal Year on year 69% 73% 73%
areas clean and well maintained increase
% Satisfied with our approach to Year on year 68% 69% 70%
handling anti-social behaviour increase
Number of people into jobs and Year on year
1,592 1,500 2,081
training increase
% Vacant homes available for
letting (General needs (GN) and 0.75% 0.58% 0.95% 0.62%
Housing for older people (HOPS))
----- End of picture text -----

These KPIs help ensure we’re supporting our resident neighbourhoods to thrive. We’re running projects to drive estate improvements and we’ve revised our anti – social behaviour policy to get residents to the right place of support first time.

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Objective 5

Build homes to meet housing need

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
Build completions 1,200 776 1,402 1,089
Sales receipts from new homes £81.4m £44.0m £125.1m £126.8m
New home starts N/A 348 500 952
----- End of picture text -----

We will continue to measure the progress in completing our development programme but given we will not be starting any uncommitted schemes the new home starts will no longer be monitored as a strategic KPI.

Objective 6

Empower our people

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
% Colleagues satisfied overall with 75% 81% 75% N/A
Southern as an employer
Average number of sickness days
8 days 8 days 8 days 8 days
absent per employee
% Colleagues leaving for a
15% 11% 15% 14%
voluntary reason
% Agree we treat residents fairly Year on year
81% 70% 84%
and with respect increase
----- End of picture text -----

Ensuring we are a great place to work where colleagues are treated with respect continues to be an important strategic aim for the organisation, and these KPIs help us to track performance.

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Objective 7

Deliver efficiency

----- Start of picture text -----
KPI Target 2024-25 Actual 2023-24 Target 2023-24 Actual 2022-23
% Operating margin overall
18.6% 14.1% 20.2% 13.2%
(excludes all sales)
% Current rent arrears (GN and
4.7% 4.7% 4.5% 4.7%
HOPS)
Social Housing Cost per Unit metric
7,120 6,844 6,582 5,544
(£)
EBITDA-MRI Cash Interest Cover
45.8% 38.7% 72.6% 72.3%
(Excl. Sales) (%)
----- End of picture text -----

We achieved our post merger efficiency target in 2023/24 of £3.1 million but this is not fully reflected in an improvement to our operating margin, which is subject to other drivers particularly around delayed scheme handovers impacting rent and sales income. Although below target, our operating margin was higher than in 2022/23. Our cost per unit was above target due to increased investment in existing homes. Given the challenging economic environment we find ourselves operating in, ensuring efficiency savings are delivered postmerger is an important strategic goal. We’ve therefore added Social Housing Cost Per Unit and EBITDA-MRI cash interest cover to our suite of strategic KPIs reviewed monthly by Executive Team and quarterly by the Board.

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Insourcin g

Our in-house teams have taken charge of cleaning and grounds maintenance services in Sussex. As part of our ongoing insourcing programme we successfully went live with two new teams in Sussex from 2 April 2024.This transition marks an important step in our plans to bring services in-house and provide better quality and more efficient services to our residents. Insourcing these services has many benefits for our residents:

✓ Local engagement

✓ Strengthening our visibility within the community

✓ Quicker turnaround on service enquiries

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Sustainability and Energy and Carbon Emissions

We have a responsibility to understand the impact our organisation has on the environment and ensure we contribute towards a sustainable world. We have an ambitious programme to reduce resident utility costs and deliver our services in a more efficient manner. With over 98% of our carbon emissions coming from our property portfolio, environmental sustainability and decarbonisation of our homes continues to be part of our wider asset management agenda. Our work is supported by our Sustainability and Asset Management Strategies. Our new Environmental Sustainability Strategy sets out our long-term vision to achieve net zero by 2050 as well as our more detailed plans over the next three years, covering carbon, water, waste, transport, materials, overheating, flooding, and biodiversity. A new Retrofit Programme Board is made up of key staff members who will oversee the delivery.

Understanding our homes and land

All our homes will be Energy Performance Certificate (EPC) rating of C or above by 2030 where practical, cost effective and affordable, with 97% of new homes rating B or above. At 31 March 2024 74% of our homes were at EPC Band C or above, and we’re aiming to achieve 77% by 2026.

We’re continuing to deliver essential capital investment programmes to meet the current Decent Homes Standard (DHS). At 31 March 2024 99.7% of our homes achieved DHS. We undertake home condition surveys which also measure our homes against the DHS and Housing Health Safety Rating System (HHSRS) to ensure our properties meet Government targets for sustainability, and around 86% of our homes have been surveyed in the past five years.

Residents have told us that green spaces and nature are important to them, they are also critical for us to help prevent flooding, and to have trees to help reduce overheating and pollution. We’ve so far mapped out over half of our grounds maintenance responsibilities, specifying the ground cover of grass, shrubbery and woodland. This is supported by a tree survey which so far has mapped nearly 17,500 trees, collecting information on tree species age, structure and condition. We’re also working with residents and stakeholders to co-create a biodiversity pathway.

Residents at the heart

Residents’ views are an essential part of our sustainability journey. The invaluable insight we received at resident workshops, along with over 1,500 responses to our sustainability survey means we’ve included areas in our sustainability strategy that are important to residents and their communities. A highlight for the sustainability team over the last year is the collaboration with Swale Borough Council and our residents on a project to plant 500 trees in Sittingbourne. The new trees will support local biodiversity and bring a positive impact to our resident’s health and wellbeing.

We’ve also set up a number of local nature and gardening projects with residents, and in collaboration with our contractors who provide support through funds and labour. All projects aim to have an impact on the whole community, as well as improving biodiversity. We have several resident sustainability champions and we’re delighted that one of our residents became a Climate Champion Power List winner in the Unlock Net Zero Live awards 2023.

Reducing consumption

Sustainability and residents are very important to us. We don’t have all the answers to every environmental issue impacting our residents right now, but we do have a clear direction of travel.

Some of the commitments we’ve made to support our residents in reducing consumption are as follows:

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Strategic Report 27

SECR Re ort Submission Statement p

We set out below Southern Housing’s energy use and carbon emissions for 2023/24. This disclosure is in line with the Government’s Streamlined Energy and Carbon Reporting (SECR) methodology and is disclosed voluntarily.

MEASURE 2023/24 2022/231
SCOPE 1 Combustion of fuels
Gas heating in homes2
Gas heating in ofces
Combustion of fuel for Southern Housing owned vehicles
SCOPE 2 Indirect emissions from the electricity we purchase
Purchased electricity for our ofces
Purchased electricity for our homes3
Purchased Electricity for Recharging EV Fleet
SCOPE 3 All other indirect emissions		 12,473
11,284
118
1,071
5,927
429
5,496
2
119,245		 13,115
11,874
172
1,069
6,035
496
5,539
N/A
123,954
Combustion of fuel from personal vehicles used for business purposes4 497 147
Transmission and Distribution losses 513 551
Estimated carbon emissions of social homes5 118,235 123,256
Total emissions (tonnesCO2e) including scope 3 homes 137,645 143,104
CO2emissions per home managed (including scope 3 homes) 2.27 2.35
Total emissions (tonnesCO2e) excluding scope 3 homes 18,897 19,296
Number of homes managed (with asset investment liability) 60,755 61,003
CO2emissions per home managed (excluding scope 3 homes) 0.31 0.32

Methodology

The above has been prepared in accordance with the provisions of the GHG Reporting Protocol - Corporate Standard and HM Government “Environmental Reporting Guidelines including Streamlined energy and carbon reporting guidance”

DEFRA conversion factors 2023 have been used to convert electricity and gas consumption from kWh to tonnes CO e 2

DEFRA conversion factors 2023 have been used to convert transport fuel consumption and mileage from litres/miles to tonnes CO e 2

[1] Revised figures based on actual energy usage 202223

[2] Where Southern Housing buys the gas; primarily heat networks and some communal heating. Data is extrapolated for March 2024, based on full billing April 2023 to February 2024.

[3] Where Southern Housing buys the electricity; primarily communal electricity for lighting, lifts etc, though there is some electric heating. 95% of meters fully billed to December 2023, with the remainder extrapolated based on billing cycle and adjusted for seasonal patterns where there’s electric heating.

[4] The increased mileage is due to staff relocation as part of office consolidation strategy and operational efficiencies. Consolidation of office space reduced e. office carbon emissions by 50 tonnes CO2

[5] Carbon emissions are based on the calculated SAP score, using Portfolio software, adjusted using 2023 carbon conversion factors. NB: only includes rented homes owned by Southern Housing, excluding those already included scope 1 or 2.

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Strategic Report 28

Actions on energy efficiency undertaken in the reporting period

Our Biodiversity Pathway to 2030

Biodiversity is the variety of life on our planet, from micro-organisms and fungi to plants and animals. They live in harmony with each other in an intricate support system to carry out vital ecosystem services including climate regulation, air filtration and pollination. We need to do our bit to help protect our planet and the biodiversity within it, working with it rather than against it. We’ve co-created our biodiversity statement with our residents. We aim to:

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Strategic Report 29

Financial Review

Our results for 2023/24 were below budget due to rising costs and delayed completion of development sites. Performance has been impacted by several material adverse to budget items totalling £24 million:

Spend on reactive repairs to existing homes increased by £12 million to £74 million. We’ve experienced both cost increases and delays on many of the sites in our development programme, as a consequence of a number of our development contractors entering into administration. This has resulted in initial and market sales income of £44 million being significantly lower than the previous year and rents being below budget by £4 million.

Fair value investment property adverse movements of £32 million charged below operating surplus net of interest costs led to an overall loss before tax. The reduction in investment property fair value is partly due to different assumptions and changes in yields. Despite these results we have significant headroom against banking covenants, with modest gearing, low financing risk and strong liquidity.

Turnover for the year was £609 million. We reported an operating surplus of £108 million and an operating margin of 12% (including first tranche and market sales but excluding property disposals). Our social housing activities generated an operating margin of 16%. Operating surplus includes £32 million surplus on housing property disposals (2022/23: £47 million).

Cost of sale includes an impairment provision of £1 million and other social housing impairment is £2 million (2022/23: £27 million) bringing the balance sheet provision to £30 million. The provision covers two land sites held ahead of development where values have fallen and a provision for schemes where sales values have been impacted by current market conditions and higher cost of sales due to contractor failures. Net interest costs increased by £7 million. Loss before tax is £28 million (2023/24: surplus £80 million). At 31 March 2024 we had fixed assets of £6.4 billion (at cost) and reserves of £1.7 billion.

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2023/24 2022/23 2021/22
RESULTS
£m £m £m
Turnover 609 642 592
Cost of sales (48) (105) (87)
Operating costs (485) (448) (382)
Surplus on disposal of fixed assets and investments 32 47 42
Operating surplus 108 136 165
Loss on commercial sales (2) - -
Net interest payable (103) (96) (89)
Surplus before fair value movements 3 40 76
Fair value property and investment movements (30) 5 9
Derivative movement (1) 35 55
(Loss) / surplus for the year (28) 80 140
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Combined Southern Housing comparatives

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30

Analysis of turnover

General needs £401m
Supported & HOPs £63m
Shared ownership £62m
First tranche sales £40m
Student accommodation £14m
Other non social housing £13m
Other social housing £4m
Keyworker accommodation £9m
Market sales £4m

Analysis of expenditure

Maintenance £213m
Management £95m
Services
Depreciation (housing properties)
Cost of sales: frst tranche
Other social housing		 £74m
£68m
£35m
£14m
Cost of sales: market sales £12m
Student accommodation £11m
Other non social housing £11m

Operating costs (excluding cost of sales) increased by £38 million to £485 million. We increased our maintenance spend by £66 million and services spend increased by £11 million. This is driven by high cost inflation, increased complexity of jobs and the volume of jobs required plus adding resources in to the team including a new Damp and Mould Team. Management costs decreased by £18 million partly due to efficiency savings but also due to reallocating increased maintenance related corporate overhead costs to maintenance spend.

Interest and sales

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Statement of Financial Position (Balance sheet)

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2023/24 2022/23 2021/22
STATEMENT OF FINANCIAL POSITION
£m £m £m
Total fixed assets and investments 6,433 6,219 5,945
Net current assets 54 105 191
Total assets less current liabilities 6,487 6,324 6,136
Long term liabilities and provisions (4,811) (4,615) (4,505)
Net assets 1,676 1,709 1,631
Reserves 1,676 1,709 1,631
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Housing properties

Housing properties are mainly held at historical cost, unamortised grant is held in creditors. The movement in fixed asset carrying cost of £215 million includes £257 million investment in new homes and £95 million spend on improvements and component replacements to existing homes. To date we’ve received £1.7 billion social housing and capital grant to support our development programme.

Pensions

At 31 March 2024 we operate five funded schemes and two defined contribution schemes which are used for auto enrolment. We exited one funded scheme in January 2024 (Kent County Council Local Government Pension Scheme). Two of the five funded schemes are in deficit and all are closed to new members. The liability on the funded schemes is £13 million, total unrecognised surplus is £27 million. The defined contribution schemes offered to new colleagues carry no deficit risk to Southern Housing.

Reserves

Our reserves are fully reinvested back into services and new and existing homes to support us providing safe and sustainable communities.

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2023/24 2023/24
HOMES £bn Funded by £bn
Property cost less depreciation and Loans and bonds net of
6.1 3.0
impairment cash and short term investments
Unamortised grant 1.7
Revenue reserves 1.7
Other balances (0.3)
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Combined Southern Housing comparatives

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32

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2023/24 2022/23 2021/22
CASH FLOW
£m £m £m
Cash generated from operations 219 319 325
CASHFLOW FROM INVESTING ACTIVITIES
Purchase of assets (369) (436) (414)
Investment in joint venture - 3 7
Grant received 1 53 32
Interest received 10 4 -
CASHFLOW FROM FINANCING ACTIVITIES
Net borrowings 226 136 221
Interest paid (124) (120) (106)
NET CHANGE IN CASH (37) (42) 65
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We had £109 million cash and liquid resources at 31 March 2024.

Social Housing Lettings performance

Our core business is social housing lettings with our main tenures being general needs, supported housing, keyworkers and shared ownership. Our operating margin reduced by 3%, turnover increased by £53 million and management costs decreased by £18 million, partly due to efficiency savings but also due to reallocation of additional corporate overheads to maintenance costs. This was offset by increased spend on maintenance of £66 million and services of £12 million. Cost pressures and rising stock investment needs have continued to impact our operating margins.

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SOCIAL HOUSING LETTINGS PERFORMANCE 2023/24 2022/23 2021/22
Homes owned and/or managed 71,724 70,707 69,036
Revenue £535m £481m £449m
Operating surplus £83m £90m £93m
Operating margin 16% 19% 21%
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Combined Southern Housing comparatives

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Non social housing

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STUDENT ACCOMMODATION – NON SOCIAL HOUSING 2023/24 2022/23 2021/22
Homes owned and/or managed 1,654 1,654 1,835
Revenue £14m £12m £11m
Operating surplus £3m £2m £2m
Operating margin 23% 17% 21%
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The student direct let portfolio closed the financial year with 99.5% occupancy against a target of 98%.

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2023/24 2022/23 2021/22
SOCIAL IMPACT
£m £m £m
Revenue 1.2 1.6 1.4
Costs 5.6 3.9 3.5
Southern Housing investment 4.4 2.3 2.1
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Contractors and businesses contributed towards a range of social impact activities, including providing training, donating staff hours, providing materials for community projects, making charity donations and providing job and placement opportunities.

Development and sales performance

We completed 776 homes last year against a target of 1,402. The difficult economic operating environment has continued to cause issues for us in delivering our programme, cost pressures and labour issues faced by our contractors has resulted in a number going into administration. Whilst construction material price inflation is now moderating, recent price rises are still being keenly felt. There is a risk of significant cost increases when reprocuring build contracts, which were previously fixed price and largely procured before the recent period of high build price inflation. Progressing developments is also still being hampered by shortages of materials and labour.

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DEVELOPMENT AND SALES PERFORMANCE 2023/24 2022/23 2021/22
Homes started 348 952 1,148
Homes completed 776 1,089 851
Homes in contract at 31 March 3,256 3,936 3,605
Homes available for sale – shared ownership 173 257 238
Homes available for sale – open market 27 40 45
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Combined Southern Housing comparatives

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PROPERTY 2023/24 2022/23 2021/22
DISPOSALS WITHIN
OPERATING SURPLUS Turnover Surplus Turnover Surplus Turnover Surplus
Margin Margin Margin
(£m) (£m) (£m) (£m) (£m) (£m)
Shared ownership
40 5 12% 60 9 16% 53 5 9%
first tranche
Open market sales 4 (9) 0% 67 12 18% 58 20 34%
Staircasing & right 30 15 - 42 23 - - 25 -
to buy
Other social
housing property 41 18 - 70 24 - - 16 -
sales
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The reduction in sales volumes is due to delayed handovers of new schemes and a reduction in first tranche percentage sold. Overall we’ve seen a slower pace of sales than anticipated, particularly for market sales. We ended the year with an encouraging pipeline of future sales; 146 exchanges on homes and a further 73 reservations.

Liquidity and financing

At 31 March 2024 we had £109 million cash and £1,825 million bonds in issue. None of these were retained bonds.

In June 2023 we sold £30.0 million of our sustainable linked retained 2036 bonds. In July 2023 we repurchased and cancelled £50 million of our 2044 bond. In August 2023 we sold the remaining £20 million 2036 retained bonds and sold our remaining £68.5 million retained 2035 bond. In September 2023 we tapped both our 2043 and 2048 bonds to issue further £100 million and £150 million respectively. Both amounts were retained for future sale with the £100 million 2043 retained bonds sold in September 2023 and the £150 million 2048 retained bonds sold in November 2023.

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2023/24 2022/23 2021/22
FUNDING SOURCES
£m £m £m
Cash and cash equivalents 109 146 188
Undrawn available bank facilities 866 1,239 1,054
Retained bonds held - 119 100
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METRICS 2023/24 2022/23 2021/22
INTEREST RATE PROFILE
% of net debt fixed 89% 88% 92%
Weighted average debt cost 4.2% 3.8% 3.7%
Derivative mark-to-market £12.7m £14m £(21)m
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Combined Southern Housing comparatives

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Strategic Report 35

Our Board drives the delivery of efficiencies supported by the whole business and residents. We are embedding a culture of cost awareness. Colleagues understand efficiency is not just about cost cutting but about freeing up resources to invest in making a bigger positive impact on society.

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KEY FINANCIAL INDICATORS 2023/24 2022/23 2021/22
Number of homes in management excluding leaseholders 73,686 72,671 71,182
We started 349 homes and completed 776 homes.
Social Housing cost per unit £6,844 £5,544 £5,052
Cost per unit increased by £1,300. Maintenance spend increased by £1,319 and service costs increased by
£136. Management costs decreased by £202, despite total spend including a one off pension charge of £4
million.
Interest cover (Association as per loan agreements) 190% 203% 204%
^ EBITDA per home (excluding impairment) £1,862 £3,554 £4,039
^ EBITDA - including impairment charge provision per home £1,817 £3,187 £4,039
^ EBITDA - excluding fair value movements per home £2,243 £2,638 £3,124
^^ EBITDA MRI per home £533 £2,387 £3,303
^^ EBITDA MRI excluding fair value movements per home £961 £1,838 £2,388
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^ EBITDA per home (excluding impairment)
£1,862
£3,554
^EBITDA - including impairment charge provision per home
£1,817
£3,187
^EBITDA - excluding fair value movements per home
£2,243
£2,638
^^EBITDA MRI per home
£533
£2,387
^^EBITDA MRI excluding fair value movements per home
£961
£1,838		 ^ EBITDA per home (excluding impairment)
£1,862
£3,554
^EBITDA - including impairment charge provision per home
£1,817
£3,187
^EBITDA - excluding fair value movements per home
£2,243
£2,638
^^EBITDA MRI per home
£533
£2,387
^^EBITDA MRI excluding fair value movements per home
£961
£1,838		 £4,039
£4,039
£3,124
£3,303
£2,388
^EBITDA and^^EBITDA MRI have decreased due to impact of increased operating costs and negative fair
value movements.
Net debt to turnover (including sales)
4.96		 4.30 4.37
Debt less cash increased by £258 million and turnover decreased by £33 million.
Operating margin (excluding all sales)
14.1%		 13.2% 20.8%
Operating margin (excluding all sales) is below our target for the year of 20%. Pension cessation charge of £4
million and increased maintenance spend and £2 million impairment charge contributed to the reduction.
Change in turnover
(5%)
8%		 9%
Increased rent abd service charge income of £46 million ofset by lower sales income £83 million.
Change in major repair improvements capitalised year on year
63%
12%		 N/A
Efective interest rate
4.2%
3.8%		 3.6%

We increased net borrowing by £222 million, our average weighted cost of debt increased to 4.2%.

Combined Southern Housing comparatives amortisation

^ EBITDA - Earnings before interest, tax, depreciation and amortisation

^^ EBITDA MRI - including major repair improvements capitalised

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Value for Mone y

We use the Regulator of Social Housing’s value for money metrics to review our performance and target actions. We measure these against our G15 peers. Although G15 comparisons are a year behind our financial reporting they provide an effective comparison of performance. Our performance is summarised below.

Regulator of Social Housing

Value for Money metrics

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G15 Median
METRIC 1 REINVESTMENT
2023/24 2022/23 2022/23
Investment in property 5.8% 7.3% 6.0%
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This measures our investment in new and existing homes as a percentage of the total value of properties held. We invested £352 million in new and existing homes in 2023/24 compared with £422 million in 2022/23. We were above the median for reinvestment % in 2022/23 in our peer group.

METRIC 2NEW SUPPLY
2023/24
2022/23		 G15 Median
2022/23
A. New supply delivered % (social housing)
0.7%
1.5%		 1.2%
B. New supply delivered % (non-social housing)
0.0%
0.1%		 0.3%

This metric sets out new housing supply delivered by us as a proportion of our total homes at period end. We focus investment in new homes in to our core social housing business rather than non social housing activities. New supply delivered was below target due to handover delays. 2022/23 performance was above the median in our peer group for social housing supply.

METRIC 3GEARING
2023/24
2022/23		 G15 Median
2022/23
Gearing
49.9%
47.8%		 46.0%

This metric assesses how much of the adjusted assets are made up of debt and the degree of reliance on debt finance. Net debt increased by £258 million and housing assets increased by £309 million. With the majority of our older homes held at historical cost the balance sheet doesn’t reflect the true value of our assets. We’re within our lender covenant. 2022/23 performance was above the peer group median.

METRIC 4EBITDA MRI INTEREST COVER %
2023/24
2022/23		 G15 Median
2022/23
EBITDA-MRI % (excluding disposals)
38.7%
72.3%		 74.0%

This is a key indicator for liquidity and investment capacity. Our EBITDA - MRI percentage decreased, our surplus used in the calculation (excluding property disposals) decreased by £36 million and total interest payments increased by £13 million. Major repairs spend increased by £36 million. Our 2022/23 performance was just below the median in our peer group.

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G15 Median
METRIC 5 HEADLINE COST PER UNIT (CPU)
2023/24 2022/23 2022/23
Social Housing CPU £6,844 £5,544 £6,239
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Our social housing cost per unit has increased by £1,300. £1,319 is due to increased maintenance spend per home. Service charge costs increased by £153 and management costs decreased by £217. 2022/23 cost per unit was in the lower quartile compared to the G15 principally due to lower maintenance spend compared to our peers.

METRIC 6OPERATING MARGIN
2023/24
2022/23		 G15 Median
2022/23
Overall
12.4%
13.9%		 16.0%
Social Housing
15.5%
18.6%		 20.0%

The operating margin demonstrates the profitability of operating assets. Our operating margin including market and first tranche sales is 12%. Excluding all sales it increases to 14% and for the social housing activities is at 16%. Operating margin overall is below our target reflecting several material adverse costs including £4 million cessation pension charge, £6 million capital write offs, £5 million cost of sale increase, £2 million decant costs (contingent asset we expect to recover from the developer) and increase in maintenance costs due to higher costs and higher demand.

METRIC 7RETURN ON CAPITAL EMPLOYED INTEREST COVER
2023/24
2022/23		 G15 Median
2022/23
Return on Capital Employed (ROCE)
1.7%
2.2%		 2.2%

ROCE is a measure of the efficient investment of our resources. Annual operating surplus is divided by capital employed (total assets minus current liabilities). Most of our housing stock is held on balance sheet at historical cost and does not reflect the true value of the assets we hold. Our ROCE decreased, operating surplus (including sales) decreased by £27 million and capital employed increased by £159 million. Compared with our peers we’re at the median in 2022/23.

DIRECTORS’ RENUMERATION AND MANAGEMENT COSTS
2023/24		 2022/23 G15 Median
2022/23
Renumeration payable to the highest paid Director relative to our size
4.1
Aggregate amount of renumeration paid to Directors relative to our
size
28.5
Management costs relative to our size
£1,289		 6.1
32.5
£1,552		 N/A
N/A
N/A

The Transparency, Influence and Accountability Standard requires us to provide our residents with accessible information on our directors’ renumeration and management costs. These are new measures introduced by the Regulator in April 2024. We’ll be able to measure performance against our G15 peers next year. Our results show improvements in all the measures.

OTHER 2023/24 2022/23 G15 Median
2022/23
Rent collected % general needs 98.9% 98.8% 99.6%
Overheads as a % of turnover 9.4% 10.2% 11.2%
Ratio of responsive repairs to planned maintenance 0.28 0.53 0.62
Total investment in community activities £5.6m £3.9m £3.1m

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Regulator of Social Housing

Financial Forecast Return (FFR) Value for Money metrics

The metrics set out below are calculated from our FFR submission. Our forecast performance for financial year 2024/25 and 2025/26 (final year of our current strategic plan) are as follows:

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METRIC 1 REINVESTMENT 2023/24 2024/25 2025/26
Reinvestment 5.8% 8.2% 5.3%
We plan to invest £493 million in new and existing homes in 2024/25 and £333 million in 2025/26.
METRIC 2 NEW SUPPLY 2023/24 2024/25 2025/26
A. New supply delivered % (social housing) 0.7% 1.6% 2.0%
B. New supply delivered % (non-social housing) 0% 0.1% 0.1%
We’re forecasting to complete 1,272 new homes in 2024/25 and 1,659 in 2025/26.
METRIC 3 GEARING 2023/24 2024/25 2025/26
Gearing 49.9% 53.4% 51.1%
Gearing is forecast to decrease by 2025/26 as we scale back our development programme. We remain well
within our lender covenants and risk appetite set by Board.
METRIC 4 EBITDA MRI INTEREST COVER % 2023/24 2024/25 2025/26
EBITDA-MRI % 38.7% 60.4% 56.2%
Our forecast performance below 100% reflects the need to invest in major works.
We plan to spend £104 million in 2024/25 and £138 million in 2025/26.
2023/24 2024/25 2025/26
METRIC 5 HEADLINE COST PER UNIT (CPU)
£ £ £
Social Housing CPU 6,844 7,120 7,661
Our cost per unit is forecast to increase due to significantly increasing our investment in existing properties.
METRIC 6 OPERATING MARGIN 2023/24 2024/25 2025/26
Overall 12.4% 18% 19%
Social Housing 15.5% 20% 21%
By 2025/26 we forecast our operating margin both overall and for social housing lettings will have improved
as we realise efficiencies from the merger and through growth.
METRIC 7 RETURN ON CAPITAL EMPLOYED 2023/24 2024/25 2025/26
Return on Capital Employed (ROCE) 1.7% 2.4% 3.0%
Our ROCE is forecast to increase reflecting investment in new homes generating improved surpluses
through efficiencies.
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Tenanc Sustainment y

At some point in their tenancy, residents might need support with various things at once. They might be struggling to pay their rent while adjusting to their first housing association tenancy after leaving care. Or they might be suffering from mental health problems arising from domestic abuse or indebtedness. There are too many examples to list, but the point is, some residents may at times need a higher level of support than a non-specialist team can offer. And that’s where our dedicated tenancy sustainment team comes in.

Our Tenancy Sustainment Team helps residents to improve their self-sufficiency and quality of life with the aim of helping them sustain their tenancies. It provides wraparound casework support for those who need it most, looking at all areas where they can make a long-term, sustainable difference.

Residents often need help taking the first steps. The team acts as a single point of contact for other teams across Southern Housing (e.g. our specialist Financial Inclusion and Antisocial Behaviour Teams). It also helps coordinate assistance from other agencies, including Local Authority safeguarding teams and debt advice agencies.

We’ve arranged referrals to external support services, provided support with arranging repairs and compliance checks, and helped residents into jobs and training. Our approach has received external recognition, in 2023, the team were awarded ‘Team of the Year’ at the Kent Housing Excellence Awards. This recognised the unwavering support provided to our residents, ensuring they’ve everything they need to maintain a home and build a bright future.

In 2023, the team ran a resident scrutiny project on tenancy sustainment. Residents identified several areas for improvement. These included the need to regularly review policies and procedures to ensure they reflect best practice and encourage and seek out feedback directly from our residents to ensure the service reflects what’s really important. The team embedded these recommendations into their service delivery model. And now they’re working with Sheffield Hallam University on a piece of research called Holding on to Home. Researchers have surveyed hundreds of our residents and interviewed several colleagues responsible for tenancy sustainment. We’ll be acting upon their best practice recommendations once published later this year.

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Financial Planning and Treasur Mana ement y g

Board uses the long term financial plan to ensure long term covenant compliance, to establish financial risk appetite and to set an envelope for investment in new homes. We undertake a remodelling at least annually, most recently in May 2024. The plan reflects resources required to deliver our strategic objectives including the investment needed into technology, fire safety and decarbonisation.

We are a long-term property business that owns and invests in illiquid assets funded by long-term liabilities. As such our financial investment capacity is highly exposed to global financial market conditions. We’ve undertaken a wide range of stress testing on the financial plan and considered the mitigating actions Board would be able to take in an adverse scenario.

The adverse stress testing reflected the following scenarios:

  1. A disruption of the property sector

Facilities and funding

Committed facilities are mainly secured against our social housing assets (£60 million of funding is unsecured). These assets are independently valued to ensure we meet lenders’ asset cover requirements. At 31 March 2024, 44,554 homes were charged as security to lenders (including derivative counterparties). We also held 35,663 unencumbered properties of which 27,101 are chargeable.

At 31 March 2024 borrowings for the Group totalled £3.2 billion from available facilities of £4 billion. All undrawn facilities are short term revolving credit facilities and are fully secured, where required, and available to be drawn. We maintain diversification of drawings from funding sources with 32% coming from seven banks and 68% from capital markets, Government backed schemes, syndicated funding and Local Authority funding. The Group has limited nearterm re-financing risk with 79% of current debt due for repayment in over five years.

  1. A lack of Government support

  2. Legislative and regulatory asset management changes

  3. A combination of 2 and 3

  4. A perfect storm (disrupted global supply chains, combined with escalating global military conflicts causing inflationary pressures).

This stress testing shows the business to be robust even in extreme downside scenarios. We remain financially resilient and operationally strong.

Our Treasury Management Policy Statement sets out the principles, policies, procedures and objectives of our treasury management activities. We review it annually to ensure we apply best practice.

Significant treasury risks include ensuring the Group has sufficient liquidity to fund its operations and development pipeline, interest rate risks and ensuring that all loan covenants are met. Our liquidity policy requires us to have sufficient funds in place so as not to rely on sales.

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Drawn debt repayment profile

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50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Year 1 Year 2-5 Year 6-10 Year 11-20 >20 Years
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The Group manages its exposure to fluctuations in interest rates with a view to achieving an acceptable level of certainty in net interest costs. We target the range of 75% to 100% of net debt to be on a fixed rate basis. Net debt is fixed either on an embedded basis, by drawing fixed-rate loans under the terms of our loan documentation or through standalone interest rate swaps transacted under International Swaps and Derivatives Association (ISDA) agreements. At 31 March 2024 89% of net debt was fixed. The weighted average cost of debt was 4.2% (31 March 2023: 3.76%).

We manage our mark to market (MTM) exposure risk using thresholds built into our ISDA agreements below which margin calls do not arise and providing property security as collateral. At 31 March 2024, MTM fair value of interest rate swaps equalled £12.7 million (31 March 2023: £13.8 million). Thresholds and property security cover the full market exposure. A 1% fall in rates would increase our MTM exposure by £7.1 million out of the money. Our policy of over collateralisation with property security means this would not trigger a cash margin call.

Liquidity

We maintain sufficient liquidity to meet our liabilities and expenditure requirements. Our liquidity tests are as follows:

  1. Cash of £50 million to be always available, allowing for a drop to £40 million for unexpected invoices for up to five working days

  2. A minimum of £400 million cash and undrawn committed loan facilities

  3. The sum of cash and undrawn committed loan facilities to cover 18 months’ cashflow requirements, excluding any capital receipts and grant income and only including 12 months of loan repayments.

Cash and short-term balances are placed in money market funds, short-term bank deposits and in interest bearing accounts with our clearing banks.

Compliance with loan covenants

We report compliance with loan covenants quarterly to the Treasury Committee. The Group complied with all financial covenants for the year ended 31 March 2024 and financial plan indicates we will continue to do so for at least the next twelve months.

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Risk Mana ement g

Everything we do involves a certain amount of risk. We plan carefully, but there are always things that can go wrong or do not turn out as we would want them to. Risk management is the collection of actions we conduct to identify, understand and manage risks to the achievement of our objectives, it’s not about avoiding or eliminating risk. Rather it’s about understanding what the risks are, what can cause those risks to occur, their likely impact, and how we can manage or mitigate this. When we understand the risks we face we can make properly informed decisions and find efficiencies through avoiding ‘surprises’.

Our goal is for risk management to be:

Strategic risks

We define strategic risks as threats which if they occur could materially impact the long term viability of the business, or which could cause significant derailment, such that strategic objectives are not delivered. Typically these are affected by competition, sector changes, capital availability, political environment, legal and regulatory changes and reputation issues. These tend to be inter-departmental in nature and reflect cross-cutting themes. Strategic risks are owned by the Executive Team and reported to each regular Board meeting and to the Audit and Risk Committee.

Operational risks

Operational risks are significant in the context of our business. These are owned by Leadership Team (LT), who report into Executive Team, and reviewed at least quarterly. Structured in this way, we ensure risk ownership is clear and the whole operational business is risk assessed. Some Risk Registers are subject to review by committees. Risks can be “escalated” from Operational Risk Registers to the Strategic Risk Register by the Executive Team.

Risk appetite

We recognise it may not be possible to deliver our strategic objectives unless the business takes risks. We’ve a responsibility to strike the right balance between a very passive approach (taking little or no risk) and a very active approach (taking too much risk). Our Statement of Risk Appetite is an expression of how much risk we’re prepared to take. It’s set by Board and reviewed annually by Audit and Risk Committee. Risk appetite varies between different business areas, can change over time and is dependent on the opportunities or benefits presented through the activity weighed against the risk exposure. There is therefore no single definition of risk appetite which applies across the business. We consider risk appetite for each strategic risk. Board approved a revised risk appetite for the business in September 2023.

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Strate ic Risks at Ma 2024 g y

We currently have 14 strategic risks reflecting those factors representing the greatest potential exposure to Southern Housing business. These are categorised into short, medium and long-term.

We continuously monitor the operational landscape to assess emerging risks and opportunities to ensure we operate a sustainable and responsive business. Our strategic risks are managed as part of our overarching Risk and Assurance Framework (RAF) that is reviewed annually by the Board. Our approach to risk management is objectives-led with the strategic risk register aligned to the delivery of our strategic plan.

Whilst Board delegates oversight responsibility of risk to the Audit and Risk Committee, Board remains ultimately responsible for risk management. Both forums provide review, oversight, and challenge of our risk approach and strategic risks.

Our current strategic risks are outlined on the following pages.

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EMPOWER OUR PEOPLE
SUMMARY OF ACTIVITIES UNDERTAKEN
RISK TIME SPAN
TO MONITOR AND MANAGE STRATEGIC RISKS
Failure to attract, recruit, and Long Our culture programme provides guidance on our
retain people with key skills values, behaviours and expectations and forms a part
and experience to meet our of our induction process. Regular colleague surveys
business demands and cultural are performed, providing a wealth of data to help
expectations and not effectively us to continually improve and to gauge employee
managing capacity and work satisfaction. Having an effective partnership with
priorities of these colleagues. our recognised Union as well as a strong colleague
forum encourages a strong employee voice and
gives colleagues a place to formally discuss and
raise issues affecting them. We have strengthened
our in-house recruitment team and advertise our
vacancies widely across a variety of platforms to
attract diverse applicants. We expand our internal
talent pool supporting colleagues with professional
development. We ensure our employment offer to
colleagues remains competitive . We undertake pay
reviews and regular salary benchmarking to ensure
we’re attracting the best external talent.
We do not deliver our Medium The programme is overseen by the Integration
integration programme as and Transformation Committee chaired by a Board
planned, making Business member. We are making good progress with our
As Usual more challenging integration plans with people integration due to be
and failure to deliver ongoing complete late 2024 and systems integration by mid
benefits. 2025. We are also on track to deliver efficiencies as
identified in the business case for merger. Alongside
updates to Board we provide regular key indicator
reporting enabling prompt action to be taken where
performance is slipping.
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Strategic Report 45

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DELIVER EFFICIENCY
RISK TIME SPAN COMMENT AND RISK MITIGATIONS
Business negatively impacted Long Our aim is to influence Government on a wide range of
by changes to Government relevant policy decisions through senior management
policy. involvement in a number of sector forums. We
also maintain an extensive network of external
relationships with MPs, local authorities, senior civil
servants, and politicians allowing a greater level of
insight and influencing. We use our work with other
stakeholder groups such as G15, CASE, and NHF to
further influence government policy.
Potential changes are modelled through the long-term
financial plan and stress tested to ensure the Plan is
sufficiently robust and resilient.
Ineffective governance and Long We operate in a heavily regulated sector and therefore
regulatory compliance and / or operate a number of robust mechanisms to ensure we
poorly controlled business. meet our regulatory obligations. Annual assessments
are performed against the published regulatory
standards. Our quality assurance function tests
the evidence supporting our compliance with the
standards. This gives added assurance to ARC and the
Board in publicly confirming our compliance with the
standards.
Board carried out its first effectiveness review and
skills survey in 2023. We operate a complex group
structure post merger but are in the process of
simplifying it having dissolved 6 companies during
2023/24 and have a further 5 planned for 2024/25.
Financial health is not fully Long We recognise the constraining impact that setting
protected in line with risk aside increased investment in our homes has on our
appetite. ability to deliver new homes. We must therefore
operate an effective, efficient business delivering the
right services to our residents. Treasury Committee
and Board maintain strong financial control and
oversight of financial performance including covenant
compliance monitoring. Our strategy is to hold good
levels of liquidity and have a significant portfolio of
uncharged assets ready to charge should the need
arise. The annual review of the financial plan by Board
allows us to flex plans as necessary. Board sets its
appetite for risk through the financial golden rules.
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Strategic Report 46

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DELIVER EFFICIENCY
RISK TIME SPAN COMMENT AND RISK MITIGATIONS
Significant cyber security Long We recognise the extreme impact the loss of IT would
breach resulting in loss of IT have on our ability to provide effective services for
systems and / or loss of data. our residents. Audit and Risk Committee provides
strong governance and oversight of this risk. Members
carried out a deep dive into this risk during 2023/24.
We have a number of good practices in place that have
been assessed by internal audit and good awareness
of key cyber integration risks. We are implementing a
number of recommendations raised by both internal
and external audit of IT general controls. As part of
systems integration work we are phasing out on-site
servers and limiting external access to corporate
systems and are working on the implementation of a
Data Loss Prevention plan.
Fail to effectively manage Medium The changing perception of the risk profile of the
impact of insurance renewal. sector resulting in the reduction of the risk appetite
to continue to provide services to the sector by some
businesses. We recognise this risk particularly in
relation to insurance. We are working hard to ensure
we have all necessary documents in place e.g. for fire
remediation work to support our insurance. While we
recognise there is a very limited insurance market
available we will be reviewing our insurance provision
during 2024/25.
Failure to deliver efficiency Long The efficiency target for 2023/24 was achieved and the
targets. efficiency target for 2024/25 has been fully identified
in the annual budget. We maintain strong financial
control and oversight of our financial performance
including delivery against the efficiency targets.
We do not have assurance Long Robust strategies and plans for data and information
on the quality of our data or governance integration are in place and progress is
operation of our processes. ongoing to deliver in line with the Board approved
Data and Information Governance framework. Whilst
the plans are being implemented by a dedicated Data
& Business Information team, the Integration and
Transformation Committee is maintaining strong
risk management and governance oversight. Audit
and Risk Committee and Board have obtained good
controls assurance over this risk in 2023/24.
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BUILD HOMES TO MEET HOUSING NEED
RISK COMMENT AND RISK MITIGATIONS
Development activity fails to Long This risk is influenced by a notable shift in the macro
deliver against the financial plan. contracting and cost of debt environment as well
as the financial capacity needs of our existing
assets. In 2024, the Board approved the removal of
uncommitted development from the financial plan.
We monitor contractors via our financial assessment
matrix and risks are monitored by the Risk Appraisal
Group and Development and Assets Committee.
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SAFE SUSTAINABLE HOMES IN GOOD REPAIR
RISK TIME SPAN COMMENT AND RISK MITIGATIONS
Failure to implement the Long We have a comprehensive transformation programme
new legal and regulatory in place to ensure we meet the requirements of the
requirements for building safety Building Safety Act 22 and the Fire Safety Act 2021
and fire safety. and related secondary legislation. The Building Safety
Programme Board, chaired by the Executive Director
of Assets & Sustainability, oversees the programme
and progress is reported to the Executive Team and
Board. Our work is supported by a Building and Fire
Safety Policy and related management plans. Our work
on the PAS9980 programme of surveys is supported
by external experts who also risk rate and prioritise the
remediation programme.
Failure to plan and deliver Long We have been developing our understanding of the
environmental sustainability costs to deliver NZC by 2050 and EPC Band C by
targets including road map to 2030. KPIs are in place to monitor performance to
Net Zero Carbon. achieve EPC C by 2030. The long term financial plan
has been updated to reflect our latest estimates to
achieve NZC. Our work in this is area is supported by
our Environmental & Sustainability strategy available
on our website. We apply for external grant funding
to support our work wherever possible. We routinely
consider energy efficiency and wider sustainability
considerations to ensure building standards and
planning requirements are met on new build projects.
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Strategic Report 48

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GREAT CUSTOMER EXPERIENCE
RISK TIME SPAN COMMENT AND RISK MITIGATIONS
Fail to effectively manage Medium Board recognises this is an area where our
repairs service. performance is not yet reaching the levels we’d like or
our residents expect. Contract Services Directorate
has in place detailed action plans to improve services
and reduce the repairs backlog. These include a
significant increase in resources and investment
in existing homes, close contract management of
external contractors, training requirements for all
colleagues, as well as an end-to-end repairs review
underway to identify where processes can be
improved to create clear ownership and accountability
within the repairs journey.
Fail to effectively deliver Short This is a short-term risk as we bring services in house
demobilisation of incumbent and transfer away from certain contracts. We have
contractor contracts and a project steering group in place to manage the risk
mobilisation of new contractors and deliver the insourcing strategy. The first stage of
and DLO. this work was successfully completed in June 2024
with the appointment of a new repairs & maintenance
contractor in London. We involved residents in the
tendering and award process for the new contract.
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Il Ithiii Illi

STRATEGIC REPORT[02]

03 LEADERSHIP AND GOVERNANCE

04 FINANCIAL STATEMENTS

The Board

Committees

Resident Governance

Southern Housing is led by the Board which sets the strategy for the business. Our Executive Team is responsible for day to day management. We actively encourage and involve residents to work alongside us, ensuring their voice is heard at all levels and to help us improve services and drive-up performance and customer satisfaction.

Executive Team

Compliance

Effects of material estimates and judgements upon performance

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Leadership and Governance 51

The Board

The Southern Housing Board as at 24 July 2024 has twelve members and two vacancies; eleven are independent NonExecutive Directors (NEDs), of which three are Southern Housing residents. Our Chief Executive also sits on the Board. The Board brings independent oversight on all strategic issues either directly or through Committees with delegated authority. The Board also reviews performance, resources and the control framework. The Board and Committees are appraised annually, both individually and collectively. This helps to ensure that Southern Housing has ongoing effective governance.

The main responsibilities of our board include:

Sir Peter Dixon

Chair of Southern Housing Board

Peter is an experienced nonexecutive Director and is currently Chair of Flint Housing Ltd. He has also held various Board level roles including:

Daisy Armstrong

Daisy has lifelong experience of living in social housing and knows the benefits it can bring from her great-grandfathers housed in ‘Homes for Heroes’ in West London.

She is a qualified teacher, specialising in IT and design and technology, with 17 years experience of school governance; eight years as Chair of Governors.

Daisy is involved in raising the resident and disabled person’s voice as resident board member with Southern Housing, and additional roles as EDI lead, Residents Services Committee member and link board member on a regional resident’s panel. As Chair of the G15 Residents’ Group, Daisy leads the forum in informing, influencing, and celebrating the socially housed residents voice at leadership policy level.

Janet Collier Vice-Chair of Southern Housing Board

Chair of People Committee

Janet is a CIPFA qualified 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 CityWest 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 nonexecutive having been a board member and Chair of Audit Committee within the housing sector. Janet is currently also a board member and Chair of Audit and Risk at Advance Housing and Support.

Damien Régent Chair of Audit & Risk Committee

Damien is a financial analyst with expertise in credit markets and financial institutions. He’s an experienced non-executive Director and holds board level roles across different sectors including:

His previous roles were Chair of the Audit, Risk and Assurance Committee on the board of Crisis (homelessness), Non-Executive Director on the board of two software businesses, Médecins Sans Frontières UK (Doctors Without Borders) and at Reprieve, the human rights charity.

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Leadership and Governance 52

Eugenie Turton CB Chair of Residents’ Services Committee

Eugenie is a former civil servant whose last government role was Director General for Housing, Planning and Regeneration. She is an experienced non-executive Director and has held various non executive Board roles including:

She currently advises Nuclear Waste Management Services on community engagement, is Chair of Dulwich Arts Society and volunteers as a local infants school reader.

Geanna Bray

Geanna has over 20 years’ experience working in the social housing sector in executive and senior management roles. She is the Board lead for complaint handling.

(William) Howard Cresswell Chair of Integration Committee

Chair of Pensions Group

Howard is an experienced nonexecutive Director and has held various Board level roles including:

Ian Wilson

Ian is a resident board member. He is currently Head of Residential

Fund Management at Knight Frank Investment Management and has worked in the real estate industry for over 25 years. He has been a Member of Royal Institution of Chartered Surveyors (RICS) since 2000. Previously he worked at CBRE Investment Management where he launched the CBRE UK Affordable Housing Fund in 2018.

He has worked in real estate fund management since 2006 undertaking a variety of asset management, fund management and development roles. Prior to this Ian worked as both a residential and commercial property valuer.

Michelle Dovey

Chair of Treasury Committee

Michelle is an

experienced financial risk management executive and Director of MJD Treasury Solutions Ltd. She is former Chair of Board at Kairos Women Working Together.

Paul Hackett CBE

Chief Executive of Southern Housing

Paul is an Honorary Professor at the UCL Bartlett School of Sustainable Construction and a member of the Independent Advisory Board and a Fellow of RICS, the Chartered Institute of Building and an Academician of the Academy of Urbanism.

Phil Blume

Phil is a resident board member. He has been the administrator

and fundraiser for a charity that operates in the cultural heritage sector for many years.

He works with volunteers to develop a historic building as a heritage centre and museum and organises projects to conserve collections, gather and disseminate historical records and present events and exhibitions.

He also collaborates with university researchers to explore ways of telling stories using immersive technologies.

Robert Clark

Chair of Development and Assets Committee

Robert has been a qualified member of Royal Institution of Chartered Surveyors (RICS) since 1974 and retired as CEO of Durkan Ltd in 2016.

As Managing Director and CEO, he 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.

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Leadership and Governance 54

Committees

The following are the principal Committees supporting the Southern Housing Board. All Committees are chaired by a Board member.

Audit and Risk Committee

The Audit and Risk Committee (ARC) has five members; two are Board members and three are independent committee members. The Committee meets regularly with senior managers and external and internal auditors to scrutinise audit findings and the effectiveness of the internal control framework. The Committee considers and approves our risk management framework (annually) and makes any recommendations on risk management issues affecting the group or subsidiary companies.The Committee reviews the financial statements, including the applicability of policies and areas of judgement. It receives control reports and recommendations arising from internal and external audits and also considers any matters relating to fraud, whistleblowing, bribery and money laundering. The Committee meets privately with the internal and external auditors at least once a year.

Treasury Committee

The Treasury Committee has five members, two are Board members. The Committee’s role is to oversee treasury related activity and recommend the treasury strategy and plans to the Board.

Pensions Group

The group’s role is to oversee the pensions strategy for the organisation. It is chaired by a Board member and has four members three of which are independent members.

Chairs’ Group

The Chairs’ Group comprises the Chairs of the Board and Committees. The Group’s role is to consider specific issues requiring consideration/attention ahead of a Board meeting. The Group does not have any delegated powers.

Residents’ Services Committee

People Committee

The People Committee has up to four members; at least two are Board members. The Committee’s role is to support the Board to achieve strategic objectives relating to our people, our culture and our governance. The Committee also maintains oversight of equality, diversity and inclusion.

Integration & Transformation Committee

The Committee provides strategic oversight for activities relating to customer experience in all business areas including housing management, commercial housing portfolio, financial inclusion, resident involvement, social impact and property services. The Committee drives innovation to improve the customer journey and experience. The Committee has seven members, four are Board members (two residents) and three independents (one resident).

This Committee has six members, five are Board members. The Committee’s role is to support the Board to achieve strategic objectives in relation to post merger integration, achievement of efficiencies, use of technology and transformation.

Development & Assets Committee

This Committee has up to six members, two are Board members. This Committee supports delivery of our development programme, development strategy, asset management strategy and sustainability strategy. The Committee recommends the development, asset management and sustainability strategies to the Board, monitors delivery programmes and advises the Board on development and asset management issues and new initiatives.

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Residents

At Southern Housing we know the importance of living in a safe and secure environment and how this enables people to flourish. This can be achieved by staff and residents working together in partnership. Our resident governance structure is designed to strengthen resident voices and increase accountability.

Our structure is made up of several groups, with more than 100 members and covers a wide range of topics - from picking contractors to our policies, and day-to-day services. The residents across our governance structure work with senior colleagues to identify what’s working well and where we can make improvements. They have the opportunity to influence decisions that affect them, their home, and their local community. Resident Governance Members drive the panels to be effective and have a positive impact on services. They attend quarterly meetings and aim to:

The resident governance structure ensures residents’ voices are heard at every level of our organisation. The diagram below explains how our wide range of Panels and Groups work together to help influence decisions at Board level:

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Board
Residents’ Services Committee
(Including members from resident governance)
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This diagram explains how our wide range of Panels and Groups work together to help influence decisions at Board level:

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Resident Strategy Group
Regional Residents’ Service Specialist Advisory Resident
Panel Panels Networks Scrutiny Panel
Midlands London Complaints Panel Inclusion Wellbeing
Kent Sussex Resident Policy Panel Care & Support
Hampshire Berkshire Procurement Panel Older Persons
& Isle of
& Surrey
Wight Homeowners Forum
Resident Design Forum
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Leadership and Governance 56

Our resident governance structure was designed with the support of our residents. We need residents to tell us if we’re doing things right, by asking questions and challenging us and monitoring our performance against our objectives. If we do this well, we’ll be able to provide the best services to all our residents. Most Panels within the resident governance structure have up to 12 resident members. The Resident Strategy Group has 17 resident members.

Resident Strategy Group

The panel works in partnership with Board and Executive Team to develop strategy and influence budgets. This important group scrutinises and monitors performance across Southern Housing and challenges decisions made by the organisation. It is led by an independent resident Chair.

Regional Residents’ Panel

Local panels from our six regions – Midlands, London, Kent, Sussex, Hampshire and Isle of Wight and Berkshire and Surrey look at decisions made by the Resident Strategy Group. These groups are our critical friend. They consider the impact of our decisions at local level, while building and maintaining links with local communities.

Complaints Panel

Monitors and scrutinises complaints performance across the whole of Southern Housing. They sit on complaints review hearings. They’re responsible for monitoring and scrutinising complaints performance, value for money and service delivery. The panel works with our staff to make recommendations on how the complaints service could be improved and helps decide serious complaints. It isn’t involved in dayto-day resident complaints. Members also have the opportunity to consult on key policies and procedures impacting on the delivery of the complaints service.

Resident Procurement Panel

The panel work with us to get the best value for money from our contractors. They assist us with scoring bids, carrying out interviews and with awarding of contracts.

Resident Scrutiny Panel

This panel is made up of residents from across our regions. Scrutiny panel members are not able to join our other resident panels. This is to ensure the panel takes an independent view of Southern Housing’s services. Their role is to carry out in-depth scrutiny reviews of our service areas. They undertake an annual project, commissioned by the Resident Strategy Group, to scrutinise a specific service area. A report of findings and recommendations is then presented to the Resident Strategy Group, Executive Team and Board.

Resident Policy Panel

The panel monitors and scrutinises customer facing policy work across Southern Housing, as well as endorsing customer facing policies. They agree, monitor and manage the programme of policies. The panel also recommends new or revisions to existing policies to Board or Executive Team.

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Involving Residents Care and Inde endent Livin p g

Following merger, we carried out a review of our care and independent living services. Gathering and acting upon resident feedback is a priority across the organisation.

In May 2023, we established our Care and Support Specialist Advisory Forum. This sits in a prominent position within our resident governance structure and comprises 20 members. These include people with learning disabilities, mental health issues and people with care and support needs drawn from a selection of our residents.

The Forum reviews performance and has already identified several ways to improve how we communicate with residents. These include running ‘ice breaker’ exercises at the start of meetings to encourage confidence and working with residents at each service to agree terms of reference for resident meetings, clarifying each meeting’s purpose and how to participate.

We also offer a host of more informal ways for residents to get involved. During 2023, we promoted activities across our Independent Living services enabling residents to get involved and engaged with their schemes and wider community. We also started to explore the possibilities of cocreation, through which residents work alongside colleagues to identify and agree areas for improvement. In December, a resident from Green Meadows, an extra care scheme in Freshwater on the Isle of Wight, delivered a successful workshop with other members and colleagues on improving communication with residents.

We’ve held our first ‘Annual Supported Involvement Day’ on the Isle of Wight, with over 100 residents attending the event, 12 residents received an award for their achievements over the year. During 2024, we’ll continue to develop further opportunities for engagement so residents remain at the heart of all we do.

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Executive Team

The Board delegates day to day management to the Executive Team (ET). ET are supported by the Leadership Team (LT) in developing and co-ordinating our culture and values.

Paul Hackett CBE

Chief Executive

Prior to the launch of Southern Housing, Paul held the same positions at Optivo from 2017 and led AmicusHorizon as CEO from 2012. Paul has worked in the housing association sector since 1989. Before joining AmicusHorizon, Paul was Executive Director, Development and New Business with Moat. Between 2017 and 2019 Paul was Chair of G15 and a member of the Homes for Londoners Board. During his two-year term, Paul focused on building stronger relationships with the public sector and making the economic case for higher grant rates and longer-term funding. He was also a high-profile advocate of rebalancing the landlord tenant relationship. Paul is a Fellow of the RICS, CIOB and CIH. In 2021 Paul was awarded a CBE for services to social housing.

Sarah Smith

Chief Financial Officer

Sarah has worked with and in the housing association sector since 1988. She is a Chartered Accountant beginning her career with BDO. Before joining Southern Housing, Sarah spent eight years as Director of Financial Services at London and Quadrant Housing Trust. Sarah is a member of the National Housing Federation’s Finance and Policy Advisory Group. She sits on the Institute of Chartered Accountants in England and Wales (ICAEW) social housing subcommittee. She is a Trustee of Dolphin Square Charitable Trust and chairs their Audit Committee. She is a Board member and Chair of Audit Committee at Reall and was appointed to the Sustainability for Housing Board in 2021.

Jane Porter

Chief Operating Officer

Jane has worked in housing for over 30 years and has held senior executive roles in both asset and housing management, development, sales and home ownership. She has been involved in a number of Government initiated projects on fire safety and was a member of the Regulator for Social Housing’s Tenant Satisfaction Measures Sounding Board. Jane is passionate about delivering excellent customer services. She has delivered sector leading performance through the use of real time data, customer segmentation and insight. She has driven continuous improvement and efficiencies through her vision and enthusiasm for technology solutions including predictive analytics, Robotic Process Automation, Artificial Intelligence, Internet of Things and bots. She is a board member of Settle housing association and is chair of their Development and Assets Committee.

Tom Paul

Executive Director of Strategy & Change

Tom has worked for predecessor organisations for a decade. He’s responsible for strategy, corporate finance and financial planning, business transformation, data and technology. Tom’s professional background is in corporate finance. He moved into social housing in 2011 as a treasury advisor to housing associations. Tom is an economist and a member of the Chartered Institute of Securities and Investments. He’s a member of the British Property Federation’s Affordable Housing Committee, the Church of England Pensions Board’s Housing Committee, and Grand Union Housing Group’s Audit and Risk Committee.

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Richard White

Executive Director of Development

Richard has extensive experience in partnerships, land led development and delivering high quality design and place making. With over 32 years of experience in residential development, Richard started his housing career in local Government. He then progressed into senior land, planning and technical roles with FTSE 100 Housebuilders. He moved to the housing association sector in January 2017.

Jenny Poore

Executive Director of People & Culture

Jenny is a Fellow of the Chartered Institute of Personnel and Development (FCIPD). Jenny has had an extensive career spanning all aspects of Human Resources and communications. This includes senior national HR and communications roles at Royal Mail and executive appointments within the Further Education sector and at Sussex Police. Jenny joined Southern Housing Group as HR Director in 2015.

Yvette Carter

Executive Director of Contract Services

Yvette is a qualified accountant with many years’ senior strategic and commercial experience across a range of sectors including outsourced service industries, logistics and mobile technology. Yvette is directly responsible for all day-to-day repairs and estate services.

Karin Stockerl

Executive Director of Assets and Sustainability

Karin has over 20 years’ experience working in property management and construction with roles in academia, private, public and housing association sector. She’s responsible for devising and implementing our asset management strategy and our environmental sustainability strategy. Karin is chair of the G15 asset group and she’s also chair of Customer Experience Committee at Golding Homes.

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Com liance p

Health, safety and welfare of employees at work

We have an effective Health and Safety Management System, underpinned by our Health and Safety Policy statement. The Policy contains a comprehensive organisational structure and framework, sets out responsibilities of managers and staff, and summarises the arrangements for putting the Policy into practice. The Chief Operating Officer acts as the Southern Housing ‘Health and Safety Champion’ and executive lead, chairing our Health and Safety Group (HSG), and reporting to the Board on performance twice per year The COO has overall accountability and responsibility for ensuring SH meets the requirements of the Health & Safety at Work Act 1974 and other relevant health & safety legislation.

Our Director of Health and Safety is a Chartered Safety and Health Practitioner and is responsible for the strategic management and implementation of the Health and Safety Management System, supported by a competent in-house Health and Safety Team. We carry out regular inspections of health and safety standards across our portfolio, and closely monitor performance relating to key compliance areas which is scrutinised at Customer Obsession Group, HSG and Board meetings.

Our Health & Safety Policy Statement is available on our website. We are committed to following best practice in discharging our legal duties.

Environmental policy

We strive to adopt the highest available environmental standards in all areas of our operations and investment decisions. We also expect similar environmental standards from our partners. Our Environmental Performance Group monitors delivery of our energy and environment strategy. We’re committed to improving the energy efficiency of our homes which, in turn helps residents to reduce their fuel bills and to live more comfortably. We also help residents to manage their energy bills by delivering energy advice. By reducing emissions from our offices and business travel, we’re reducing our environmental impact and improving value for money. We hold a Sustainable Homes Index for Tomorrow (SHIFT) Gold rating. SHIFT provides us with the building blocks to support in the delivery of our Environmental Sustainability Strategy, guiding future advancements in renewable energy, sustainable building practices, and community projects that encourage green living.

We will publish our 2024 ESG report alongside the financial statements, prepared in accordance with the Sustainability Reporting Standard for Social Housing version 2.0. This reflects our commitment to stay aligned with evolving ESG expectations and best practice in the housing sector. We are committed to achieving net-zero carbon emissions by 2050 and are on track to ensure our homes achieve EPC Band C by 2030.

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Leadership and Governance 62

Compliance with Governance and Financial Viability Standard

The Regulator of Social Housing’s (RSH) Governance and Financial Viability Standard (the Standard) provides a framework to enable us to assess our compliance with the Standard. The overall required outcomes of the Standard are:

The Standard requires registered providers to assess their compliance with the Standard at least annually. Boards are required to report their compliance with the Standard within their annual accounts. Boards need to determine where they are obtaining their assurance to demonstrate to the RSH:

The Audit and Risk Committee reviewed the annual assurance report from the CEO on 9 July 2024. Compliance with the Regulator’s Governance and Financial Viability Standard was reviewed by the Board on 24 July 2024 which covers the compliance from 1 April 2023 until approval of the financial statements on 24 July 2024.

The Government has introduced new Consumer Standards for social housing providers with effect from 1 April 2024. They are designed to ensure associations provide a safe, secure and well-maintained home and to improve the services residents receive. The RSH will regulate landlords against these standards.

For 2023/24 we report full compliance with the regulatory standards and the Data Protection Act 2018. The Board adopted the National Housing Federation 2020 Code of Governance from Southern Housing’s inception on 22 December 2022. Southern Housing complies with this Code except for one area as reported to Board on the 24 July 2024. This area relates to Board composition. The Board comprises 14 members based on an assessment of the skills needed for the merged organisation going forward and a need to ensure that people with direct lived experience of, and insight into, the communities served by the organisation are meaningfully engaged in its governance at the highest level.

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Effects of material estimates and ud ements u on erformance j g p p

The following are the material judgements and estimates affecting performance.

Capitalisation of property development costs

Distinguishing the point at which a project is more likely than not to continue and allowing capitalisation of associated development costs requires judgement. After capitalisation management monitors the asset and considers whether changes indicate that impairment is required. The total associated development administration costs capitalised in the year was £7.6 million.

Impairment

Management assesses housing properties for indicators of impairment at each balance sheet date. Where indicators exist a detailed assessment is undertaken to compare the carrying amount of assets or cash generating units for which impairment is indicated to their recoverable amounts. Judgements in assessing the level of cash generating units and the recoverable amounts could lead to increases or decreases in the impairment provision.

Development contractors in administration

The construction industry is still facing high levels of contractors going into administration, some of our schemes in construction have been directly impacted. We are applying our judgement to assess the potential cost to complete those schemes.

Fire remediation works

We’ve determined some of the costs we incur for remediation work does not meet the recognition criteria for capitalisation set out in the SORP which requires there to be incremental future benefits (increase in the rental income over the life of the housing property, a reduction in future maintenance costs or a significant extension of the life of the property). These costs are charged as expenditure in the Statement of Comprehensive Income unless we’ve demonstrated future benefits by carrying out enhancement works at the same time.

We could avoid the legal obligation by for example disposing of the properties however, it is probable we would be expected to reflect the obligation in settlement so impacting the economic benefit of disposal. We have a comprehensive fire works programme already drawn up for 2024/25 and the budget has set aside funds to allow for anticipated programme spend up to £21 million covering 22 sites. The spend is divided between remediating defects at the time of original construction e.g. missing cavity barriers and enhancement works required if the blocks were built today. We’ve determined our constructive obligation to carry out future works is at the point when we formally notify residents of the start date for remediation works to commence. This is after we have completed a PAS9980 survey which has then been used to inform the works required and have determined the cost of those works. We apply this policy to both rented homes and shared ownership / leasehold homes. For rented and shared ownership homes remediation works are charged to the Statement of Comprehensive Income (SOCI), enhancement works are capitalised. For leasehold homes all costs are charged to the SOCI.

Defined benefit pension scheme obligations

At 31 March 2024 we had five defined benefit pension schemes, all closed to new members. Management’s estimate of the defined benefit obligation is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. We draw advice from scheme actuaries and our retained advisors. Variations in these assumptions may significantly impact the defined benefit obligation amount and the annual defined benefit expenses (as analysed in note 32). Where schemes are in surplus, having regard to the accounting standards, we have taken a judgement not to include the surpluses as assets. The net liability at 31 March 2024 was £12 million.

We’ve considered the point at which provision should be made for future fire remediation costs on shared ownership and leasehold properties. A provision is required when there is an obligation at the reporting date as a result of a past event, or there could be a legal obligation that can be enforced by law and the amount of the obligation can be estimated reliably.

Fair value

Investment properties and some financial instruments are held at fair value, differing valuation approaches may have an impact on the surplus reported. We have explained our approach to valuation in the related accounting policy and note.

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Leadership and Governance 64

Bad debt provision

We make a provision for the likelihood of debtors failing to pay. Our assumptions bandings are based on the type of debt (including customer analysis) and length of time the debt remains unpaid.

Useful lives of depreciable assets

We set out the expected useful lives of our assets in notes 13 and 14. Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and ICT equipment, changes to decent homes standards which may require more frequent replacement of key components and changes to the ability to let the property which may reduce the economic life of the property. Accumulated depreciation at 31 March 2024 was £928 million, with the total charge in year being £78 million.

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Going concern

After reviewing Southern Housing’s budget for 2024/25, cashflow forecasts to end of August 2025 and the long term financial plan, the Board has a reasonable expectation Southern Housing has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

environment and possible lower rent settlements from the Government. These scenarios are included in stress testing of our financial plan. This stress testing shows the business to be robust even in extreme downside scenarios. Board are confident our viability can be maintained and having assessed our plans, liquidity levels and mitigating actions available there is reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months to August 2025. For these reasons, they continue to adopt a going concern basis for the preparation of the financial statements.

The general UK economic environment and outlook has improved in the past year and this is factored into our macroeconomic assumptions. Board has considered the risks from the current operating

Assessment of the effectiveness of internal controls

The Board is responsible for internal control and for reviewing its effectiveness. Board delegates the ongoing review of controls to the Audit and Risk Committee and receives annual reports from the Chief Executive and the Audit and Risk Committee. Day to day management of the business is the responsibility of the Executive Team.

In order to fulfil their responsibility, the Executive Team has established an assurance framework supported by clear delegated authorities and operating procedures. We use our documented assurance framework to demonstrate to Board and

Audit and Risk Committee a transparent process of reporting on the annual internal controls. The internal audit department provides independent assessment on the robustness and effectiveness of the internal controls across the organisation. The team achieves this through a programme of reviews which are approved by and reported to the Audit and Risk Committee. The organisation also uses the services of independent third party auditors to review controls and processes where the nature of the review requires expertise not available in-house. These systems have operated throughout the financial year and up to the date of signing these accounts.

Scope of Assurance

The Board understands our internal controls system is designed to manage rather than eliminate all risks. Our procedures can only provide Board with reasonable

rather than absolute assurance against material misstatement, errors, losses or fraud.

The Board’s Review of Effectiveness

The Board recognises the business is operating in a period of heightened risk while work is underway to integrate systems and processes. The external regulatory and economic environment also continue to be challenging. Both the internal and external factors require strong systems of control and oversight to monitor and manage the risk environment.

The Board considered the Chief Executive’s report on Internal Controls and the Annual Report from Audit and Risk Committee for the year to 31 March 2024 and up to the date of signing these accounts.

The Board monitored and considered outcomes arising as a consequence of the risk management process. They also saw reports from officers on the associated integration work and control environment. The Board confirms the risk management process was in place in the year under review, up to the date of the annual report, and is regularly reviewed.

The Board confirms we had no breakdown in internal control resulting in material losses, contingencies or uncertainties which would require disclosure in the financial statements during the year.

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Leadership and Governance 66

The Board and Executive Officers

The Board and Executive Officers of the subsidiaries are shown in those entities’ financial statements.

Each Southern Housing Non Executive Board member holds one fully paid £1 share in Southern Housing. The Executive Officers hold no interest in Southern

Housing’s share capital. They do not have the legal status of directors (apart from the Chief Executive), but act as executives within the authority delegated by the Board. We have directors’ and officers’ liability insurance for the Board, Executive Officers and staff.

Statement of the Board’s responsibilities

The Board members are responsible for preparing the report of the Board and the financial statements in accordance with applicable law and regulations.

Co-operative and Community Benefit Society law and social housing legislation require the Board members to prepare financial statements for each financial year in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

In preparing these financial statements, the Board members are required to:

disclose with reasonable accuracy at any time the financial position of the Group and Association and enable them to ensure that the financial statements comply with 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 2022. They are also responsible for safeguarding the assets of the Group and Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Board members are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Association’s transactions and

The Board is responsible for ensuring that the report of the board is prepared in accordance with the Statement of Recommended Practice: Accounting by registered social housing providers 2018.

Financial statements are published on the Group and Association’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group and Association’s website is the responsibility of Board members. Board members’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

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Anti-slavery statement

We confirm, so far as we are aware, we had no acts of modern day slavery within our organisation at 31 March 2024. We recognise we need to be vigilant and committed to driving out potential acts of modern day slavery from our supply chains. We’ve responsibility under the Modern Slavery Act 2015 to ensure transparency in the provision of all our goods and services. As part of our due diligence processes to prevent slavery and human trafficking, our:

We’ve briefed Southern Housing colleagues and contractors on how to recognise the signs and symptoms of modern day slavery as part of our work around Safeguarding. Our full statement is available on our website.

Corporate criminal offence

Board are committed to preventing financial crimes, including the corporate criminal offence (CCO) of tax evasion. We take a zero-tolerance approach to any activities which facilitate tax evasion. Board are committed to ensuring good working standards and compliance with relevant laws. We’ve put in place reasonable preventive procedures informed by the 6 guiding principles set out below and approved by Audit and Risk Committee.

Risk assessment

We consider our procedures to prevent facilitation of tax evasion are proportionate to the risks we face. We keep the procedures under review. We expect all associated persons to adhere to the CCO provisions.

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Audit

Each Board member has confirmed in fulfilling their duties as a Director they have taken the steps they ought to have taken to make themselves aware of any information relevant to the audit and the auditors are aware of that information. So far as they are aware, there is no relevant audit information which they haven’t made the auditors aware of.

During the year, the Financial Reporting Council (FRC) performed an Audit Quality Review of Southern Housing’s 2022-23 audit by BDO LLP, in which they

made various recommendations for improvement in the audit quality. In May 2024, the ARC chair and vice-chair discussed the findings with the FRC and agreed the planned improvements with the BDO audit partner.

A resolution to re-appoint BDO LLP as the auditors will be proposed at the Southern Housing Board meeting on 25 September 2024.

Approval

This Report of the Board and Strategic Report were approved by order of the Southern Housing Board on 24 July 2024 and authorised for issue on 5 August.

Sir Peter Dixon Chair of Southern Housing Board 24 July 2024

Puneet Rajput Director of Governance and Regulation 24 July 2024

03 LEADERSHIP AND GOVERNANCE 04

FINANCIAL STATEMENTS

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Reserves

Consolidated Statement of Cash Flows

Analysis of changes in net debt

Notes to the Financial Statements

Other Company Information

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Independent Auditor’s Report to the Members of Southern Housin g

Opinion on the financial statements In our opinion:

We have audited the financial statements of Southern Housing (“the Association”) and its subsidiaries (“the Group”) for the year ended 31 March 2024 which comprise the Group and Association statement of comprehensive income, the Group and Association statement of financial position (balance sheet), the Group and Association statement of changes in reserves, the consolidated statement of cash flows and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s 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. Our audit opinion is consistent with the additional report to the audit committee.

Independence

On 16 December 2022, Optivo and Southern Housing Group amalgamated to become Southern Housing. We were first appointed as auditors to Optivo for the year ended 31 March 2014 and for Southern Housing Group for the year ended 31 March 2022. In considering our independence we use the Optivo appointment date.

Following a tender process for the 31 March 2024 financial audit, we were the recommendation of the Audit and Risk Committee and we were re-appointed by the Board on 7 November 2023 to audit the financial statements for the year ending 31 March 2024. The period of total uninterrupted engagement including retenders and reappointments is 11 years, covering the years ending 2014 to 2024.

We remain independent of the Group and the Parent Association in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group or the Parent Association.

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Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Board’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Board’s assessment of the Group and the Parent Association’s ability to continue to adopt the going concern basis of accounting included:

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 and the Parent 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.

Our responsibilities and the responsibilities of the Board with respect to going concern are described in the relevant sections of this report.

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Overview

Overview
2024
COVERAGE 100% (2023: 100%) of Group (defcit)/surplus before tax
100% (2023: 100%) of Group revenue
100% (2023: 100%) of Group total assets
KEY AUDIT MATTER The recoverable amount of property
developed for sale is materially misstated.		 2024 2023
The recoverable amount of housing
property is materially misstated.
MATERIALITY Group fnancial statements as a whole
£88.8 million (2023: £14.2 million based on 6.5% of adjusted operating surplus as defned
by the entity’s lending covenants) based on 1.3% of total assets.
Group specifc materiality
£10.9 million (2023: N/A) based on 1.8% of revenue.

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An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Board that may have represented a risk of material misstatement.

A full scope statutory audit was carried out for all subsidiary undertakings. Audit work on all components was performed by BDO UK, both for the purposes of reporting on the individual financial statements and for group/consolidation purposes. We identified five components which, in our view, required an audit of their complete financial information due to their size or risk characteristics and were therefore considered to be significant components.

Southern Housing (Parent) and Optivo Finance Plc were identified as significant components due to their size and risk characteristics and Southern Housing Ownership Limited, Optivo Development Services Limited and Lamborn Estates Limited due to their risk characteristics.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our 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) that we identified, 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 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.

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KEY AUDIT MATTER

The recoverable amount of property developed for sale is materially misstated

As explained in the note 17 accounting policies, properties developed for sale, including shared ownership first tranches and properties developed for outright sale, are measured at the lower of cost and net realisable value resulting in an amount recognised in the balance sheet of £150.1m.

For completed properties at the balance sheet date an assessment is needed of the anticipated selling price.

For properties in development at the balance sheet date, an assessment is needed of an anticipated selling price and a determination of the expected costs to complete and sell.

This area also represents a key area of estimation uncertainty for management, as described on page 88.

Due to the volume of property developed for sale and the inherent estimation uncertainty in determining both sales proceeds and costs to complete we considered there to be a significant risk that the carrying amount of properties developed for sale is misstated and was therefore a key audit matter.

HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER

We obtained management’s assessment of the recoverable amount of properties developed for sale as part of their year end procedures.

For a sample of property developed for sale, we have:

1. FOR
SALES
PRICE		 ¥
compared anticipated selling prices to sales prices achieved after the year end, evidence of
sales reservations, sales prices achieved for similar units in the year, valuation of properties
for marketing purposes and other selling prices of similar properties in the locality.
¥
performed a retrospective review comparing estimated selling prices at 31 March 2023 with
the prices achieved in the year for units sold in the year; and
¥
where third party valuation is used, for a sample of properties, checked expert estimates
against publicly available selling prices for comparable properties.
2. FOR
COSTS TO
COMPLETE		 ¥
obtained the latest valuers report and confrmed the nature of the contract as fxed or
variable. Compared the construction costs against the total contract value taking into
account contract variations.
¥
obtained details of the expected costs to complete from the scheme budget for that
development and agreed the budgeted contracted cost of the development to the latest
contract documentation.
¥
for the schemes selected reviewed invoices and valuation certifcates booked after the
year end in order to assess completeness of expenditure and reasonableness compared to
spend forecast. This was also performed for completed units to confrm completeness of
cost and the ‘completed’ status.
¥
assessed the accuracy of cost forecasting by looking at outturn costs compared with
budget on schemes that completed in the year.
¥
for development schemes in progress, we attended the year-end Impairment Working
Group (IWG) meeting and reviewed minutes of other IWG meetings throughout the year.
Where the IWG minutes, or other audit procedures performed indicated potential issues,
we discussed those issues with the Head of Commercial and/or individual Project Managers
(corroborating as required).
3. FOR
COSTS TO
SELL		 ¥
where material, considered computations of selling costs and compared against known
selling costs that have been incurred in the year.

KEY OBSERVATIONS

Based on the evidence obtained we did not identify any indications that the assessments of the recoverable amount made by management were inappropriate.

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KEY AUDIT MATTER

The recoverable amount of housing property is materially misstated

As described in Note 13, the Association annually assess housing properties for impairment indicators. Where indicators are identified an assessment for impairment is undertaken comparing the asset’s carrying amount to its recoverable amount.

This area is also considered by management a key estimation uncertainty as described in Note 2.

Assets are required to be reviewed for indicators of impairment annually. If such indicators exist, an impairment assessment and estimate of the recoverable amount must be performed.

Due to the inherent estimation uncertainty in determining the recoverable amount and impairment previously recognised, we considered there to be a significant risk and therefore a key audit matter.

HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER

Having obtained management’s assessment of indicators of impairment, and subsequent impairment review calculations where indicators of impairment were identified, we have:

KEY OBSERVATIONS

Based on our procedures we noted no exceptions.

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Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance

GROUP
FINANCIAL STATEMENTS
2024
2023		 GROUP
FINANCIAL STATEMENTS
2024
2023		 PARENT ASSOCIATION
FINANCIAL STATEMENTS
2024
2023		 PARENT ASSOCIATION
FINANCIAL STATEMENTS
2024
2023
MATERIALITY Southern Housing Southern Housing
BASIS FOR DETERMINING MATERIALITY Financial
statement:
£88.8m
Specifc:
£10.9m		 £14.2m Financial
statement:
£87.5m
Specifc:
£10.5m		 £13.7m
PERFORMANCE MATERIALITY Financial
statement:
£62.2m
Specifc:
£7.7m		 £10.0m Financial
statement:
£61.3m
Specifc:
£7.3m		 £9.6m
BASIS FOR DETERMINING PERFORMANCE
MATERIALITY		 70% of
materiality		 70% of
materiality		 70% of
materiality		 70% of
materiality

The materiality benchmark in the previous year was adjusted operating surplus. We have reflected on our approach to materiality and concluded that for housing associations key stakeholders are primarily focused on the value of the stable, rented asset portfolio, as their debt is secured on these assets. Total assets is therefore considered to be the appropriate benchmark for determining overall materiality. However, we also determined that for other classes of transactions and balances in income and expenditure recognised within the statement of comprehensive income that are used in covenant calculations and sector benchmarking metrics, as well as other financial statement areas such as property for sale stock and rent arrears that are subject to greater scrutiny by key stakeholders, a misstatement of less than materiality for the financial statements as a whole could influence the economic decisions of the users of the financial statements. As a result, we applied a specific materiality calculated using Revenue

as the benchmark to these balances and transactions. Revenue is considered to be a more stable metric to use for this purpose than adjusted operating surplus and is also more transparent and more easily understood by the users of the financial statements.

We have determined that 70% of materiality is an appropriate basis for performance materiality based on our previous experience of the audit and factors such as the low levels of misstatements previously identified partially offset by some areas of the financial statements subject to significant estimation uncertainty.

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Component materiality

For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, apart from the Parent Association whose materiality is set out above, based on a percentage of between 0.1% and 16.8% of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £30 to £14.9m. In the audit of each component, we further applied performance materiality of 80% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold

We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of £1.7m (Financial statement) and £219k (Specific) (2023: £285k Financial statement). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The Board are responsible for the other information. The other information comprises the information included in the annual report and financial statements, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. 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 in this regard.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where we are required by the Co-operative and Community Benefit Societies Act 2014 to report to you if, in our opinion:

Responsibilities of the Board

As explained more fully in the Statement of the Board’s responsibilities, the Board is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Board members 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 Board are responsible for assessing the Group 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 Board either intend to liquidate the Group or the Association or to cease operations, or have no realistic alternative but to do so.

Auditor’s 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 auditor’s 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.

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Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of noncompliance 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:

Non-compliance with laws and regulations

Based on:

We considered the significant laws and regulations to be 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 2022.

The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the Regulator of Social Housing’s Regulatory Standards, employment law, Financial Conduct Authority (“FCA”) regulations, data protection, fire safety legislation and health and safety legislation.

Our procedures in respect of the above included:

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Fraud

We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:

Based on our risk assessment, we considered the areas most susceptible to fraud to be management override through accounting estimates and inappropriate journal entries and revenue recognition from property sales.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that 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, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the members of the Association, as a body, in accordance with the Housing and Regeneration Act 2008 and the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the members as a body, for our audit work, for this report, or for the opinions we have formed.

Our procedures in respect of the above included:

Paula Willock

For and on behalf of BDO LLP, Statutory Auditor London, UK

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Southern Housing Annual Report 2023-24

Financial Statements 81

Statement of comprehensive income

for the year ended 31 March 2024

NOTES GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
TURNOVER
3a
Cost of sales
3a
Operating expenditure
3a
Surplus on disposal of housing properties
3c		 609.0
642.3
(48.0)
(105.3)
(485.3)
(447.7)
32.7
46.7		 582.3
565.1
(18.4)
(38.2)
(488.4)
(439.0)
31.9
43.8
Operatingsurplus 108.4
136.0		 107.4
131.7
Commercial property write of
9
Interest receivable
10
Interest and fnancingcosts
11		 (2.3)
-
10.3
3.9
(113.6)
(100.0)		 (2.3)
-
38.6
21.8
(122.3)
(110.1)

Surplus before fair value movements		 2.8
39.9		 21.4
43.4
Movement in fair value of fnancial instruments
11
Movement in fair value of investment properties
15
Movement in fair value of investments
16		 (1.1)
35.2
(31.7)
0.1
1.4
4.6		 (1.3)
34.3
(20.3)
0.2
-
-
(Defcit) / surplus before taxation (28.6)
79.8		 (0.2)
77.9

Taxation
12		 0.4
(0.1)		 (0.6)
-
(Defcit) / surplus before taxation (28.2)
79.7		 (0.8)
77.9

Actuarial loss in respect of defned beneft pension
schemes
32		 (3.7)
(2.3)		 (3.7)
(2.3)
Total comprehensive (defcit) /income for theyear (31.9)
77.4		 (4.5)
75.6

All activities relate to continuing operations.

The financial statements were approved by the Board on 24 July 2024, authorised for issue on 5 August 2024 and were signed on its behalf by:

Sir Peter Dixon Chair

Janet Collier Vice Chair

Puneet Rajput Secretary

The notes on pages 86 to 131 form part of these financial statements.

Southern Housing Annual Report 2023-24

Financial Statements

82

Statement of Financial Position (Balance Sheet)

as at 31 March 2024

NOTES GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
FIXED ASSETS
Tangible fxed assets - Housing properties
13
Tangible fxed assets - other
14
Investment properties
15
Other investments
16
Unlisted investments
16		 6,055.1
5,777.8
50.1
80.4
290.7
325.4
15.7
13.9
21.7
21.0		 5,713.7
5,481.5
49.7
79.4
219.5
242.0
12.4
14.0
21.7
21.3
Total fxed assets 6,433.3
6,218.5		 6,017.0
5,838.2

CURRENT ASSETS
Properties held for sale
17
Debtors: amounts falling due within one year
18
Debtors: amounts falling due after one year
18
Cash and cash equivalents
20		 150.1
175.2
76.3
76.9
34.3
25.7
109.0
146.1		 64.6
58.6
72.7
354.7
466.2
85.7
98.4
127.3
Total current assets 369.7
423.9		 701.9
626.3
Creditors: amounts fallingdue within oneyear
21		 (316.2)
(319.1)		 (307.1)
(294.6)
Net current assets 53.5
104.8		 394.8
331.7
Total assets less current liabilities 6,486.8
6,323.3		 6,411.8
6,169.9
Creditors: amounts falling due after more than one
year
22		 (4,796.5)
(4,596.9)		 (4,799.9)
(4,557.8)
Provisions and other liabilities
26
Pension liability
32		 (1.4)
(1.6)
(12.6)
(16.0)		 (9.3)
(1.6)
(12.6)
(16.0)
Net assets 1,676.3
1,708.8		 1,590.0
1,594.5
CAPITAL AND RESERVES
Share capital - non equity
28
General reserve
Designated reserve
General reserves
Restricted reserve
Revaluation reserve		 -
-
1,674.8
1,706.7
1.0
1.3
1,675.8
1,708.0
0.2
0.4
0.3
0.4		 -
-
1,588.8
1,593.0
1.0
1.1
1,589.8
1,594.1
0.2
0.4
-
-
Total reserves 1,676.3
1,708.8		 1,590.0
1,594.5

The financial statements were approved by the Board on 24 July 2024, authorised for issue on 5 August 2024 and were signed on its behalf by:

Sir Peter Dixon Chair

Janet Collier Vice Chair

Puneet Rajput Secretary

The notes on pages 86 to 131 form part of these financial statements.

Southern Housing Annual Report 2023-24

Financial Statements

83

Statement of Changes in Reserves

For the year ended 31 March 2024

----- Start of picture text -----
General Designated Restricted Revaluation
reserve reserve reserve reserve Total
GROUP £m £m £m £m £m
Balance as at 1 April 2023 1,706.7 1.3 0.4 0.4 1,708.8
Reclassification (0.6) - - - (0.6)
Deficit for the year (28.2) - - - (28.2)
Actuarial loss on defined benefit pension schemes (3.7) - - - (3.7)
Total comprehensive income for the year (31.9) - - - (31.9)
Reserves transfers 0.6 (0.3) (0.2) (0.1) -
Balance as at 31 March 2024 1,674.8 1.0 0.2 0.3 1,676.3
----- End of picture text -----

ASSOCIATION
General
reserve
£m		 Designated
reserve
£m		 Restricted
reserve
£m		 Total
£m
Balance as at 1 April 2023
1,593.0
Defcit for the year
(0.8)
Actuarial loss on defned beneft pension scheme
(3.7)
Total comprehensive income for the year
(4.5)
Reserves transfers
0.3		 1.1
-
-
-
(0.1)		 0.4
-
-
-
(0.2)		 1,594.5
(0.8)
(3.7)
(4.5)
-
Balance as at 31 March 2024
1,588.8		 1.0 0.2 1,590.0

For the year ended 31 March 2023

----- Start of picture text -----
General Designated Restricted Revaluation
reserve reserve reserve reserve Total
GROUP £m £m £m £m £m
Balance as at 1 April 2022 combined 1,629.0 1.4 0.6 0.4 1,631.4
Surplus for the year 79.7 - - - 79.7
Actuarial loss on defined benefit pension scheme (2.3) - - - (2.3)
Total comprehensive income for the year 77.4 - - - 77.4
Reserves transfers 0.3 (0.1) (0.2) -
Balance as at 31 March 2023 1,706.7 1.3 0.4 0.4 1,708.8
----- End of picture text -----

Surplus for the year
79.7
-
Actuarial loss on defned beneft pension scheme
(2.3)
-
Total comprehensive income for the year
77.4
-
Reserves transfers
0.3
(0.1)
Balance as at 31 March 2023
1,706.7
1.3		 -
-
-
(0.2)
0.4		 -
-
-
0.4		 79.7
(2.3)
77.4
-
1,708.8
ASSOCIATION
General
reserve
£m		 Designated
reserve
£m		 Restricted
reserve
£m		 Total
£m
Balance as at 1 April 2022 combined
1,517.4
Surplus for the year
77.9
Actuarial loss on defned beneft pension scheme
(2.3)
Total comprehensive income for the year
75.6
Reserves transfers
-		 0.9
-
-
-
0.2		 0.6
-
-
-
(0.2)		 1,518.9
77.9
(2.3)
75.6
Balance as at 31 March 2023
1,593.0		 1.1 0.4 1,594.5

The notes on pages 86 to 131 form part of these financial statements.

Southern Housing Annual Report 2023-24

Financial Statements

84

Consolidated Statement of Cash Flows

for the year ended 31 March 2024

----- Start of picture text -----
2024 2023
£m £m
CASHFLOWS FROM OPERATING ACTIVITIES
(Deficit) / surplus for the year (28.2) 79.7
ADJUSTMENTS
Interest payable 113.6 100.0
Interest receivable (10.3) (3.9)
Commercial write off 2.3 -
Tax (0.4) (0.1)
Share of surplus in joint venture (1.4) (4.6)
Net fair value losses/(gains) recognised in profit or loss 32.8 (35.3)
Depreciation and amortisation 59.2 59.8
Impairment 3.3 25.1
Cost of properties disposed in the year 25.1 59.6
Difference between net pension expense and cash contribution (7.1) (10.6)
Decrease in stocks 35.4 43.3
Increase in trade and other debtors (8.0) (22.0)
(Decrease)/increase in trade and other creditors (8.8) 28.8
Decrease in provisions (0.2) (0.3)
Net cash from operating activities 207.3 319.5
CASHFLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (344.7) (420.8)
Purchase of investment property (7.3) (15.3)
Investment in joint ventures (0.3) 2.8
Interest received 10.3 3.9
Net capital grant received (4.0) 52.7
Net cash used in investing activities (346.0) (376.7)
CASHFLOW FROM FINANCING ACTIVITIES
Proceeds from long term borrowings (loans) 136.0 105.9
Proceeds from long term borrowings (bonds) 270.5 81.5
Interest paid (124.4) (120.0)
-
Repayment of borrowings – bonds (47.0)
Repayment of borrowings – loans (133.5) (51.8)
Net cash generated by financing activities 101.6 15.6
Net change in cash and cash equivalents (37.1) (41.6)
Cash and cash equivalents at start of year 146.1 187.7
Cash and cash equivalents at end of year 109.0 146.1
----- End of picture text -----

The notes on pages 86 to 131 form part of these financial statements.

Southern Housing Annual Report 2023-24

Financial Statements 85

Analysis of Change in Net Debt

CASH AND CASH EQUIVALENTS
At 1 April
2023
£m		 Cashfows
£m		 Other non
cash changes
£m		 At 31 March
2024
£m
Cash
95.8
Cash equivalents
50.3
146.1
BORROWINGS
Debt due within one year
(94.8)
Debt due after one year
(1,249.1)
Bonds
(1,506.5)
(2,850.4)
DERIVATIVES
13.8		 (43.7)
6.6
(37.1)
59.6
(62.1)
(223.5)
(226.0)
-		 -
-
-
-
3.9
(95.0)
(91.1)
(1.1)		 52.1
56.9
109.0
(35.2)
(1,307.3)
(1,825.0)
(3,167.5)
12.7
Total
(2,690.5)		 (263.1) (92.2) (3,045.8)

The notes on pages 86 to 131 form part of these financial statements.

Southern Housing Annual Report 2023-24

Financial Statements 86

Notes to the Financial Statements for the ear ended 31 March 2024 y

Introduction

Southern Housing was formed on 16 December 2022 when Optivo and Southern Housing Group merged. This business combination was effected through an Amalgamation under s109 of the Community Benefits Societies Act 2014.

Legal status

Southern Housing is registered with the Financial Conduct Authority under the Co-operative and Community Benefits Societies Act 2014 and is registered with Homes England as a social housing provider. The Association is a public benefit entity and has adopted the public benefit entity sections of FRS 102.

1. Accounting Policies

The financial statements have been prepared in accordance with FRS 102 the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland, the Statement of Recommended Practice (SORP) for Registered Social Housing Providers 2018 and the Accounting Direction for Private Registered Providers of Social Housing 2022.

The functional and presentation currency is GBP. The figures are rounded to the nearest million.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting judgements and estimates. It also requires management to exercise judgement in applying the Group’s accounting policies. The impact potential variations may have on the financial information are explained in the accounting policies below. In preparing the separate financial statements of the parent Association, advantage has been taken of the following disclosure exemptions available in FRS 102:

The following principal accounting policies have been applied consistently in relation to the financial statements.

Basis of consolidation

The consolidated financial statements present the results of Southern Housing and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. Control of each subsidiary is established through holding 100% of the share capital or through ability to appoint the Board.

Going concern

The Group’s business activities, its current financial position and factors likely to affect its future development are set out within the Strategic Report. The Group has in place long term debt facilities which provide adequate resources to finance committed reinvestment and development programmes, along with the Group’s day to day operations.

After reviewing Southern Housing’s budget for 2024/25, cashflow forecasts to August 2025 and the long term financial plan 2024-55, the Board have a reasonable expectation Southern Housing has adequate resources to continue in operational existence for the foreseeable future.

Southern Housing Annual Report 2023-24

Financial Statements

87

The general UK economic environment and outlook has improved in the past year and this is factored into our macroeconomic assumptions. Board have considered the risks from the current operating environment and possible lower rent settlements from the Government. These scenarios are included in stress testing of our financial plan. This and additional stress testing on a disruption of the property sector, a lack of Government support, legislative asset management changes and a disrupted global supply chain shows the business to be robust even in these extreme downside scenarios. We’d be able to take mitigating actions including disposal of our London offices, mothballing uncommitted development sites and re-setting expectations for our efficiency programme. Board are confident our viability can be maintained and having assessed our plans, liquidity levels and mitigating actions available there is reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months to August 2025. For these reasons, they continue to adopt a going concern basis for the preparation of the financial statements.

Segmental reporting

As we have publicly traded securities within the Group we are required to disclose information about our operating segments under IFRS 8. Segmental information is disclosed in notes 3(a) and 3(b) and as part of the analysis of housing properties in note 13. Information about income, expenditure and assets attributable to material operating segments are presented on the basis of the nature and function of housing assets held by the Group rather than geographical location. As permitted by IFRS 8 this is appropriate on the basis of the similarity of the services provided, the nature of the risks associated, the type and class of customer and the nature of the regulatory environment across all of the geographical locations in which the Group operates. The Board does not routinely receive segmental information disaggregated by geographical location.

Cash and cash equivalents

Cash and cash equivalents in the Group’s consolidated and Association balance sheet consist of cash at bank and in hand, deposits and short term investments with an original maturity of three months or less.

Impairment of rental and other trade receivables

The Association and Group estimates the recoverable value of rental and other receivables and impairs the debtor by appropriate amounts. When assessing the amount to impair the Association and Group reviews the age profile of the debt, historical collection rates and the class of debt. Former tenant arrears are written off to the statement of comprehensive income at the point the resident exits the property to the extent that they are not considered recoverable.

Reserves

Income received, and expenditure incurred, for restricted and designated purposes is separately accounted for within restricted and designated funds. The revaluation reserve was established on transition to FRS 102 on application of the deemed cost model which allowed first time adopters to elect to measure an item of fixed assets at its fair value at the date of transition and to use that fair value as its deemed cost at that date. This was only applied for two subsidiaries; Julia Spicer Homes and Eason Gruaz. Movements in the revaluation reserve relate to depreciation in the year of homes held at deemed cost.

Southern Housing Annual Report 2023-24

Financial Statements 88

2. Judgements in applying accounting policies and key sources of estimation uncertainty

In preparing these financial statements, key judgements have been made in respect of the following:

Other key sources of estimation uncertainty Tangible fixed assets (notes 13 and 14)

Southern Housing Annual Report 2023-24

Financial Statements

89

Investment properties (note 15)

Fair value measurement of derivatives (note 11)

Defined benefit pension schemes (note 32)

Recovery of properties developed for sale (note 17)

Southern Housing Annual Report 2023-24

Financial Statements 90

3. Turnover

Income is measured at the fair value of the

consideration received or receivable. The Group generates the following material income streams:

Charges made to leaseholders for the replacement of equipment and repairs within their estates are held in sinking funds which are ring-fenced for use on those estates. Such sinking funds are disclosed on the balance sheet as creditors.

Rent and service charge agreements

The Association has made arrangements with individuals and households for arrears payments of rent and service charges. These arrangements are effectively loans granted at nil interest rate.

Schemes managed by agents

Income represents rent receivable. Management fees payable to agents are included in operating costs.

Rental income

Rental income is earned from social housing properties, key worker accommodation, student accommodation, market rent lettings and commercial lettings. Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting, net of voids. Rental income received in advance is disclosed within creditors in the balance sheet.

Income from disposal of properties

Income from first tranche sales is recognised at the point of legal completion of the sale. The profit or loss on disposal of social housing properties intended for outright sales or first tranche sales is recognised within operating surplus. Any profit or loss on disposal of investment properties is recognised below the operating surplus.

Service charges

The Group operates both fixed and variable service charges on a scheme by scheme basis. Service charges on all schemes are set on the basis of budgets. 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 for the year and a deficit being recovered via a higher service charge.

Government grants

As required by the Housing SORP, grant is carried as deferred income in the balance sheet and released to the statement of comprehensive income on a systematic basis over the useful economic life of the asset for which it was received. In accordance with Housing SORP the useful economic life of the housing property structure has been selected (see table of useful economic lives below).

Social housing grant (SHG) 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 within the statement of comprehensive income.

Grants relating to revenue are recognised in the statement of comprehensive income over the same period as the expenditure to which they relate once performance related conditions have been met. Grants due to government organisations or received in advance are included as liabilities.

Other grants

Grants received from non-government sources are recognised using the performance model. Grants are recognised as income when the associated performance conditions are met.

Southern Housing Annual Report 2023-24

Financial Statements 91

3(a). Particulars of turnover, operating costs and operating surplus Group

2024
Turnover
£m
Cost of
sales
£m
Operating
costs
£m
Fixed asset
disposals
£m
Operating
surplus/
(defcit)
£m		 2023
Turnover
£m
Cost of
sales
£m
Operating
costs
£m
Fixed asset
disposals
£m
Operating
surplus/
(defcit
£m
SOCIAL HOUSING ACTIVITIES (NOTE 3b)
OTHER SOCIAL HOUSING ACTIVITIES
First tranche sales
Supported housing
Other (abortive & other development costs)
Impairment housing properties
Impairment stock		 534.5
-
(451.9)
-
82.6
40.3
(39.8)
-
-
0.5
4.1
-
(3.9)
-
0.2
-
-
(5.2)
-
(5.2)
-
-
(2.1)
-
(2.1)
-
4.4
-
-
4.4
44.4
(35.4)
(11.2)
-
(2.2)		 481.1
-
(391.4)
-
89.7
60.1
(50.7)
-
-
9.4
7.3
-
(9.1)
-
(1.8)
1.5
-
(1.6)
-
(0.1)
-
-
(22.4)
-
(22.4)
-
-
(2.0)
-
(2.0)
68.9
(50.7)
(35.1)
-
(16.9)
SURPLUS ON ASSET DISPOSAL (NOTE 3c) -
-
-
32.7
32.7		 -
-
-
46.7
46.7
NON SOCIAL HOUSING ACTIVITIES
Community activities
Market & sub-market renting
Student accommodation		 1.2
-
(5.6)
-
(4.4)
5.8
-
(1.8)
-
4.0
13.8
-
(10.7)
-
3.1		 1.6
-
(3.9)
-
(2.3)
4.9
-
(1.8)
-
3.1
12.2
-
(10.1)
-
2.1
Commercial renting 3.2
-
(1.7)
-
1.5		 3.2
-
(3.1)
-
0.1
Market sales 3.7
(7.1)
-
-
(3.4)		 66.7
(54.6)
-
-
12.1
Impairment market sales stock -
(5.5)
-
-
(5.5)		 -
-
-
-
-
Other (includes South East Consortium) 2.4
-
(2.4)
-
-		 3.7
-
(2.3)
-
1.4
30.1
(12.6)
(22.2)
-
(4.7)		 92.3
(54.6)
(21.2)
-
16.5
TOTAL 609.0
(48.0)
(485.3)
32.7
108.4		 642.3
(105.3)
(447.7)
46.7
136.0

Community activities for Fresh Visions and Southern Housing includes grant received from the Big Local Trust (Heart of Sidley) of £50k (2023: £44k) and related expenditure of £66k (2023: £41k); Medway Council £100k (2023: £55k) and related expenditure of £100k (2023: £55k); Lambeth Council £10k (2023: £Nil) and related expenditure of £4k (2023: £Nil). Unspent grant is carried forward to spend in 2024/25.

Southern Housing Annual Report 2023-24

Financial Statements

92

3(a). Particulars of turnover, operating costs and operating surplus Association

2024
Turnover
£m
Cost of
sales
£m
Operating
costs
£m
Fixed asset
disposals
£m
Operating
surplus/
(defcit
£m		 2023
Turnover
£m
Cost of
sales
£m
Operating
costs
£m
Fixed asset
disposals
£m
Operating
surplus/
(defcit
£m
SOCIAL HOUSING ACTIVITIES (NOTE 3b)
OTHER SOCIAL HOUSING ACTIVITIES
First tranche sales
Supported housing support costs
Services to Group companies
Qualifying charitable donation
Other (abortive & other development costs)
Impairment housing properties
Impairment stock
Impairment of investment		 525.0
-
(450.0)
-
75.0
19.5
(22.3)
-
-
(2.8)
4.1
-
(3.9)
-
0.2
2.5
-
-
-
2.5
9.6
-
-
-
9.6
-
-
(4.6)
-
(4.6)
-
-
(2.1)
-
(2.1)
-
3.9
-
-
3.9
-
-
-
-
-		 473.0
-
(387.4)
-
85.6
39.7
(33.4)
-
-
6.3
7.3
-
(9.1)
-
(1.8)
0.4
-
-
-
0.4
11.2
-
-
-
11.2
1.5
-
(1.6)
-
(0.1)
-
-
(18.3)
-
-
-
-
(2.0)
-
(2.0)
-
-
(0.3)
-
(0.3)
35.7
(18.4)
(10.6)
-
6.7		 60.1
(33.4)
(31.3)
-
(4.6)
SURPLUS ON ASSET DISPOSAL (NOTE 3c) -
-
-
31.9
31.9		 -
-
-
43.8
43.8
NON SOCIAL HOUSING ACTIVITIES
Community activities
Market & sub-market renting
Student accommodation		 0.7
-
(4.9)
-
(4.2)
4.3
-
(0.9)
-
3.4
10.8
-
(10.2)
-
0.6		 1.2
-
(3.3)
-
(2.1)
4.2
-
(1.5)
-
2.7
9.9
-
(9.9)
-
-
Commercial renting 3.2
-
(1.7)
-
1.5		 3.2
-
(3.1)
-
0.1
Market sales -
-
-
-
-		 9.5
(4.8)
-
-
4.7
Loan lossprovision -
-
(8.0)
-
(8.0)		 -
-
-
-
-
Other (includes South East Consortium) 2.6
-
(2.1)
-
0.5		 4.0
-
(2.5)
-
1.5
21.6
-
(27.8)
-
(6.2)		 32.0
(4.8)
(20.3)
-
6.9
TOTAL 582.3
(18.4)
(488.4)
31.9
107.4		 565.1
(38.2)
(439.0)
43.8
131.7

Southern Housing Annual Report 2023-24

Financial Statements

93

3(b). Particulars of income and expenditure from social housing lettings Group

General
needs
housing
£m		 Independent
living, Care
& Supported
Housing
£m		 Keyworkers
£m		 Other
housing
provision
£m		 Shared
ownership
£m		 Temporary
social
housing
£m		 2024
Total
£m		 2023
Total
£m
Rents receivable net of identifable service charges
356.2
Service charges receivable
23.0		 36.9
19.0		 8.2
-		 -
-		 38.0
19.6		 0.8
0.2		 440.1
61.8		 402.1
53.6
NET RENTAL INCOME
379.2		 55.9 8.2 - 57.6 1.0 501.9 455.7
Amortised government grant
13.4
Other revenue income
8.8		 2.4
0.2		 -
0.9		 -
2.2		 3.0
1.2		 0.1
0.4		 18.9
13.7		 19.4
6.0
TURNOVER FROM SOCIAL HOUSING LETTINGS
401.4		 58.5 9.1 2.2 61.8 1.5 534.5 481.1
EXPENDITURE ON LETTINGS ACTIVITIES
Management
63.1
Bad debts
2.3
Service charge costs
41.1
Routine maintenance
82.7
Planned maintenance
85.9
Major repairs
39.8
Impairment of housing properties and stock
-
Depreciation of housing properties
59.7
Other
-		 13.1
0.1
16.6
1.2
0.8
-
-
7.1
-		 4.9
(0.1)
-
0.9
0.9
0.2
-
1.0
-		 0.6
0.1
0.2
-
-
-
-
-
-		 12.5
-
16.2
-
-
-
-
-
-		 0.8
-
0.1
-
-
-
-
0.1
-		 95.0
2.4
74.2
84.8
87.6
40.0
-
67.9
-		 112.8
3.0
62.3
71.1
67.4
7.7
2.3
64.4
0.4
OPERATING COSTS ON SOCIAL HOUSING
374.6		 38.9 7.8 0.9 28.7 1.0 451.9 391.4
OPERATING SURPLUS ON SOCIAL HOUSING LETTINGS
26.8		 19.6 1.3 1.3 33.1 0.5 82.6 89.7
Void loss
(4.4)		 (2.0) (0.1) - - (0.1) (6.6) (5.9)

Southern Housing Annual Report 2023-24

Financial Statements

94

3(b). Particulars of income and expenditure from social housing lettings (continued) Association

General
needs
housing
£m		 Independent
living, Care
& Supported
Housing
£m		 Keyworkers
£m		 Other
housing
provision
£m		 Shared
ownership
£m		 Temporary
social
housing
£m		 2024
Total
£m		 2023
Total
£m
Rents receivable net of identifable service charges
350.1
Service charges receivable
22.6		 36.7
18.7		 8.2
-		 -
-		 35.5
19.0		 0.8
0.2		 431.3
60.5		 394.7
52.2
NET RENTAL INCOME
372.7		 55.4 8.2 - 54.5 1.0 491.8 446.9
Amortised government grant
13.6
Other revenue income
9.5		 2.4
0.2		 -
0.9		 -
2.2		 3.0
0.9		 0.1
0.4		 19.1
14.1		 19.2
6.9
TURNOVER FROM SOCIAL HOUSING LETTINGS
395.8		 58.0 9.1 2.2 58.4 1.5 525.0 473.0
EXPENDITURE ON LETTING ACTIVITIES
Management
63.8
Bad debts
2.2
Service charge costs
40.1
Routine maintenance
82.5
Planned maintenance
85.7
Major repairs
39.9
Impairment of housing properties and stock
-
Depreciation of housing properties
59.5
Other
-		 13.2
0.1
16.5
1.1
0.8
-
-
7.1
-		 4.9
(0.1)
-
0.9
0.9
0.2
-
1.0
-		 0.6
0.1
0.2
-
-
-
-
-
-		 12.0
-
15.8
-
-
-
-
-
-		 0.8
-
0.1
-
-
-
-
0.1
-		 95.3
2.3
72.7
84.5
87.4
40.1
-
67.7
-		 112.8
2.9
61.0
70.6
67.0
7.6
2.3
62.8
0.4
OPERATING COSTS ON SOCIAL HOUSING
373.7		 38.8 7.8 0.9 27.8 1.0 450.0 387.4
OPERATING SURPLUS ON SOCIAL HOUSING LETTINGS
22.1		 19.2 1.3 1.3 30.6 0.5 75.0 85.6
Void losses
(4.3)		 (1.9) (0.1) - - (0.1) (6.4) (5.6)

Southern Housing Annual Report 2023-24

Financial Statements 95

3(c). Fixed asset disposals

----- Start of picture text -----
Staircasing
and lease Right Other 2024 2023
extensions to buy properties Total Total
GROUP £m £m £m £m £m
Disposal proceeds 27.1 2.8 40.8 70.7 113.9
Cost of disposals (14.4) (1.0) (22.6) (38.0) (67.2)
Surplus on asset disposals 12.7 1.8 18.2 32.7 46.7
Staircasing
and lease Right Other 2024 2023
extensions to buy properties Total Total
ASSOCIATION £m £m £m £m £m
Disposal proceeds 26.3 2.8 39.6 68.7 110.1
Cost of disposals (14.2) (1.0) (21.6) (36.8) (66.3)
Surplus on asset disposals 12.1 1.8 18.0 31.9 43.8
----- End of picture text -----

Southern Housing Annual Report 2023-24

Financial Statements

96

  1. Units of housing stock Group
SOCIAL HOUSING HOMES
1 April
2023		 SOCIAL HOUSING HOMES
1 April
2023		 Additions Disposals Tenure
change		 Other 31 March
2024
General needs rent
45,722
General needs afordable rent
5,729
Supported housing rent
1,501
Supported housing afordable rent
27
Housing for Older People rent
5,781
Housing for Older People afordable rent
100
Key workers
1,209
Low cost home ownership
8,625
Temporary & intermediate rent
1,879
Care homes
134		 119
352
9
-
-
-
-
915
33
6		 (81)
(6)
(8)
-
-
-
-
(162)
(103)
-		 52
(32)
(54)
-
46
-
-
(45)
-
(12)		 1
-
(1)
-
-
-
(5)
(3)
-
(4)		 45,813
6,043
1,447
27
5,827
100
1,204
9,330
1,809
124
Total social housing homes owned and
or managed
70,707		 1,434 (360) (45) (12) 71,724
Total social housing homes owned but
not managed
613
Total social housing homes managed but
not owned
676
NON SOCIAL HOUSING
Market rent
310
Student accommodation
1,654		 81
939
-
-		 (49)
(56)
(2)
-		 -
-
-
-		 -
(2)
-
-		 645
1,557
308
1,654
Total non social housing homes owned
and or managed		 1,964 - (2) - - 1,962
Total owned and managed 72,671 1,434 (362) (45) (12) 73,686
Leaseholders
6,089		 - - 45 - 6,134
Total
78,760		 1,434 (362) - (12) 79,820

We own an average 61% equity in shared ownership properties. Included in low cost homeownership of 9,330 are 163 homes where a less than 100% equity share has been disposed of but no rent is charged on the remaining portion.

Other movements include transfers between tenures and stock swaps with other social housing providers.

Southern Housing Annual Report 2023-24

Financial Statements

97

  1. Units of housing stock Association
SOCIAL HOUSING HOMES
1 April
2023		 SOCIAL HOUSING HOMES
1 April
2023		 Additions Disposals Tenure
change		 Other 31 March
2024
General needs rent
45,722
General needs afordable rent
5,729
Supported housing rent
1,501
Supported housing afordable rent
27
Housing for Older People rent
5,781
Housing for Older People afordable rent
100
Key workers
1,209
Low cost home ownership
8,625
Temporary & intermediate rent
1,879
Care homes
134		 119
352
9
-
-
-
-
915
33
6		 (81)
(6)
(8)
-
-
-
-
(162)
(103)
-		 52
(32)
(54)
-
46
-
-
(45)
-
(12)		 1
(1)
-
-
-
(5)
(3)
-
(4)		 45,813
6,043
1,447
27
5,827
100
1,204
9,330
1,809
124
Total social housing homes owned and
or managed
70,707		 1,434 (360) (45) (12) 71,724
Total social housing homes owned but
not managed
613
Total social housing homes managed but
not owned
3,227
NON SOCIAL HOUSING
Market rent
310
Student accommodation
1,654		 81
1,071
-
-		 (49)
(122)
(2)
-		 -
-
-
-		 -
(405)
-
-		 645
3,771
308
1,654
Total non social housing homes owned
and managed
1,964		 - (2) - - 1,962
Total non social housing homes
managed but not owned		 204 - - - - 204
Total owned and managed 72,671 1,434 (362) (45) (12) 73,686
Leaseholders
5,606		 89 - 45 - 5,740
Total
78,277		 1,523 (362) - (12) 79,426

We own an average 61% equity in shared ownership properties. Included in low cost homeownership of 9,330 are 163 homes where a less than 100% equity share has been disposed of but no rent is charged on the remaining portion.

Southern Housing Annual Report 2023-24

Financial Statements

98

5. Operating surplus for the year

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
OPERATING SURPLUS IS STATED AFTER CHARGING/(CREDITING)
Grant amortised
(18.9)
(19.4)
Depreciation – housing properties
65.4
61.2
Depreciation – other fxed assets
9.7
10.7
Impairment housing properties & stock
3.2
26.7
Accelerated depreciation
2.8
3.2
OPERATING LEASE CHARGES
- Land & building
1.6
1.4
- Other
0.8
1.2
AUDITORS’ REMUNERATION
- in respect of audit services
0.7
0.8
- in respect of other non audit services
0.1
0.1
Defned beneft scheme total operating charge (note 32)
5.8
2.1
Defned contribution scheme pension cost
11.0
7.2		 (19.0)
(19.3)
64.9
60.4
10.1
10.6
(1.8)
23.2
2.8
2.8
1.6
1.3
0.8
1.2
0.6
0.7
0.1
0.1
5.8
2.1
11.0
7.1

6. Employees

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
STAFF COSTS (INCLUDING DIRECTORS) CONSIST OF
Wages & salaries
Social security costs
Pension costs
Redundancy costs		 100.0
91.8
9.8
9.7
11.8
8.7
1.6
0.5		 99.5
91.4
9.8
9.7
11.8
8.6
1.6
0.5
123.2
110.7		 122.7
110.2

More details on pension costs can be found in note 32.

Social security costs
Pension costs
Redundancy costs
More details on pension costs can be found in note 32.		 9.8
9.7
11.8
8.7
1.6
0.5
123.2
110.7		 9.8
9.7
11.8
8.6
1.6
0.5
122.7
110.2
GROUP
2024
FTE
2023
FTE		 ASSOCIATION
2024
FTE
2023
FTE
FTE ANALYSIS
Administration
Development
Housing, DLO, Support and Care		 436
521
96
130
1,892
1,841		 436
521
96
130
1,892
1,841
2,424
2,492		 2,424
2,492

The average number of employees (including directors) expressed as full time equivalents (calculated based on a standard working week of 35-36 hours) during the year was as shown above.

Southern Housing Annual Report 2023-24

Financial Statements

99

7. Directors’ and senior executives’ remuneration

The key management personnel are defined as the Chief Executive and the Executive Team of Southern Housing who served during the year ended 31 March 2024 disclosed in the Leadership and Governance section.

The key management personnel are defned as the Chief Executive and the Executive Team of Southern Housing
who served during the year ended 31 March 2024 disclosed in the Leadership and Governance section.		 The key management personnel are defned as the Chief Executive and the Executive Team of Southern Housing
who served during the year ended 31 March 2024 disclosed in the Leadership and Governance section.
GROUP AND
ASSOCIATION
THE EMOLUMENTS OF THE EXECUTIVE OFFICERS WERE
2024
£m		 2023
£m
Executive directors’ emoluments (excluding pension)
1.9
Pension contributions
0.2
Total compensation paid for loss of ofce to Directors and Senior Executives
-		 2.2
0.2
0.5

The Group Chief Executive was the highest paid director in 2023/24.
Due to payments made for loss of ofce the Deputy Chief Executive
was the highest paid director in 2022/23
Total remuneration paid to the highest paid director (excluding pension contributions,
including compensation for loss of ofce) for the year
0.3
0.4

The Group Chief Executive is a member of Southern Housing’s defined contribution scheme which is managed by TPT Retirement Solutions. A contribution of £31.4k (2023: £29.2k) was made to this scheme on his behalf. There are no enhanced or special terms that apply to the Group Chief Executive’s pension scheme arrangements.

The remuneration (including employer pension contributions) paid to staff (including Executive Team) earning over £60,000:


over £60,000:
over £60,000:
GROUP AND
ASSOCIATION
BAND
2024
Employees
2023
Employees
£60,000 - £70,000
160
127
£70,001 - £80,000
75
58
£80,001 - £90,000
40
37
£90,001 - £100,000
28
20
£100,001 - £110,000
17
16
£110,001 - £120,000
14
11
£120,001 - £130,000
8
13
£130,001 - £140,000
8
7
£140,001 - £150,000
12
4
£150,001 - £160,000
5
5
£160,001 - £170,000
4
2
£170,001 - £180,000
1
1
£180,001 - £190,000
-
1		 GROUP AND
ASSOCIATION
BAND
2024
Employees		 2023
Employees		 BAND
2024
Employees		 2023
Employees
£60,000 - £70,000
160
£70,001 - £80,000
75
£80,001 - £90,000
40
£90,001 - £100,000
28
£100,001 - £110,000
17
£110,001 - £120,000
14
£120,001 - £130,000
8
£130,001 - £140,000
8
£140,001 - £150,000
12
£150,001 - £160,000
5
£160,001 - £170,000
4
£170,001 - £180,000
1
£180,001 - £190,000
-		 127
58
37
20
16
11
13
7
4
5
2
1
1		 £190,001 - £200,000
-
£220,001 - £230,000
3
£230,001 - £240,000
-
£250,001 - £260,000
1
£260,001 - £270,000
-
£270,001 - £280,000
1
£280,001 - £290,000
2
£300,001 - £310,000
-
£310,001 - £320,000
-
£330,001 - £340,000
1
£460,001 - £470,000
-		 1
-
2
1
2
-
-
1
1
-
1
TOTAL
380		 311

*Includes payments for loss of office

Southern Housing Annual Report 2023-24

Financial Statements

100

8. Non-Executive Board and Committee members

2024
Remuneration
£		 2024
Expenses
£		 2024
Total
£		 2023
Total
£
Sir Peter Dixon
Eugenie Turton
Howard Cresswell
Michelle Dovey
Damien Régent
Janet Collier
Robert Clark
Geanna Bray
Ian Wilson
Philip Blume
Carol Rosati
Darrell Porter
Charles Joseland
Grace Alaneme
Daisy Armstrong
Billy Brown
Candice McCausland
Carolyn Porretta
Kathryn Smith
Liz Curran
Matthew Abbott
Maureen Nicholas
Abi Gray
Malcolm Groves
Karen Moscrop
Sara Jane Ensor
Judith Harding
Ben Broad
Benjamin Carlton-Jones
Charles Pears
Claire Gemma Virginie
Justin Chittock
Anita Hockin
Nick Stephenson
Andrew Burder
Nigel Tinker
Malcolm Zack
Arthur Merchant
David Lewis
Joanna Hawkes
Julie Blair
Beverley Costain
Deborah Mansfeld
Sarah Chaudhry		 33,080
18,500
18,500
18,500
18,500
18,000
16,000
13,624
13,000
13,000
12,000
10,000
10,000
8,873
8,684
6,500
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
4,475
4,475
3,000
3,000
3,000
3,000
2,579
-
-
-
-
-
-
-
-
-
-
-		 -
38
-
122
31
-
-
254
-
384
-
-
-
-
-
179
-
-
-
-
-
-
-
412
-
-
174
-
-
342
-
-
200
-
-
-
-
-
-
-
-
-
-
-		 33,080
18,538
18,500
18,622
18,531
18,000
16,000
13,878
13,000
13,384
12,000
10,000
10,000
8,873
8,684
6,679
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,412
5,000
5,000
4,649
4,475
3,000
3,342
3,000
3,000
2,779
-
-
-
-
-
-
-
-
-
-
-		 29,521
16,631
16,000
16,719
16,000
13,786
13,198
15,390
10,900
10,900
14,614
5,063
7,054
12,646
7,587
5,233
4,646
4,646
4,646
4,846
4,646
4,670
12,000
5,000
3,593
3,593
-
-
3,000
3,000
3,000
3,000
-
1,278
9,384
13,154
3,375
25,000
12,000
12,000
4,500
3,000
3,000
3,000
310,290 2,136 312,426 365,219

The pay structure for non-executive members recognises the need for a high level of professionalism and time commitment from our Board and Committee members. The performance and the amount paid to Board and Committee members is reviewed annually. Remuneration is based on sector benchmarking data for comparable sized associations. The Fresh Visions People Limited Trustees are unpaid. The total payments to Board and Committee members in 2023/24 is less than 0.1% of our turnover.

Southern Housing Annual Report 2023-24

Financial Statements

101

9. Commercial property write off

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Commercial property write of
(2.3)
-
(2.3)
-
(2.3)
-
(2.3)
-
This is the write of on demolition of one of our schemes, Eaton Place, Margate.		 (2.3)
-		 (2.3)
-
(2.3)
-		 (2.3)
-

10. Interest receivable and income from investments

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Bank and deposit interest
Interest rate swap
Investment income
Intercompany interest receivable		 1.9
2.2
5.9
-
2.5
1.7
-
-		 1.5
1.7
5.9
-
2.5
1.7
28.7
18.4
10.3
3.9		 38.6
21.8

Southern Housing Annual Report 2023-24

Financial Statements

102

11. Interest and financing costs

Financial instruments and borrowings

Southern Housing has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to its financial instruments. Financial assets and financial liabilities are recognised when the organisation becomes a party to the contractual provisions of the instrument, and are offset only when the organisation currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. All borrowings have been assessed as meeting the basic definition in Section 11 and are therefore initially recognised at the transaction price, including transaction costs, and are subsequently measured at amortised cost. Interest expense is included in interest payable and similar charges. Loans and investments payable or receivable within one year are not discounted.

Finance costs

Finance costs are charged to income and expenditure over the term of the debt. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Deferred financing costs

Deferred financing costs represent the costs incurred in securing new borrowing facilities. They are deducted from the value of the housing loans and bond and amortised over the life of the housing loans or bond to which they relate using the effective interest rate method. The deferred financing cost includes the discount and premium on the bond issue. The carrying amount of the housing loans or bond will be increased by the finance cost for each reporting period and reduced by repayments made in respect of the loan or bond in that period.

Capitalised interest

Derivative instruments and hedge accounting

The Group holds floating rate loans which expose the Group to interest rate risk. To mitigate against this risk the Group uses interest rate swaps. These instruments are measured at fair value at each reporting date. They are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Movements in fair value are recognised in the statement of comprehensive income. The derivatives are accounted for in accordance with FRS 102 – Section 12 at fair value through profit or loss.

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 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 4.2% per annum (2023: 3.77% per annum).

Where an interest rate swap that converts variable rate debt into fixed rate debt qualifies for hedge accounting, it is accounted for as a cash flow hedge. The cumulative change in the fair value of the interest rate swap is recognised in other comprehensive income up to the amount of the cumulative fair value movement on the variable rate debt that is attributable to the variable interest rate risk. Any excess fair value gains or losses on the interest rate swap not recognised in other comprehensive income are recognised in profit or loss. The gains and losses recognised in other comprehensive income are recorded as a separate component of equity (the cash flow hedge reserve).

Southern Housing Annual Report 2023-24

Financial Statements 103

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Bank loans
Interest rate swaps
Recycled capital grant fund
Other interest & fnancing costs
Net interest on pension funds
INTEREST CAPITALISED ON CONSTRUCTION OF HOUSING PROPERTIES
OTHER FINANCING COSTS THROUGH INCOME AND EXPENDITURE
(Loss) / gain on basic swap derivative instruments		 129.1
103.2
-
1.7
2.4
1.0
3.5
16.0
0.5
0.4		 128.9
102.9
-
2.0
2.3
1.0
4.1
18.9
0.5
0.4
135.5
122.3		 135.8
125.2
(21.9)
(22.3)		 (13.5)
(15.1)
113.6
100.0		 122.3
110.1
(1.1)
35.2		 (1.3)
34.3

Other interest payable includes non utilisation cost, amortisation of loan setup cost, amortisation of premium/ discount as well as finance agency and administration costs.

12. Taxation

No taxation is payable on the charitable surpluses of the Association, Southern Housing. The Association may be required to pay tax on trading income derived from non-charitable activities. Taxation is chargeable on the surpluses of subsidiary entities which includes Crystal Palace Housing Association Limited, Optivo Finance plc, Optivo Development Services Limited, Lamborn Estates Limited, Optivo Homes Ltd, Southern Home Ownership Limited, Southern Space Limited, Southern Development Services Limited, Spruce Homes Limited and Southern Housing Construction Limited. Surpluses either in whole or in part are transferred to the parent by a qualifying charitable donation which then reduces the taxation charge accordingly. The tax impact of qualifying charitable donation is accounted for when it is probable that the qualifying charitable donation will be made.

The tax charge has been assessed on the basis that it is probable that qualifying charitable donation 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.

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.

Deferred tax mainly arises from timing differences relating to revaluation of investment properties in entities that are subject to tax.

Southern Housing Annual Report 2023-24

Financial Statements

104

Value Added Tax

The Group charges Value Added Tax (VAT) on some of its income and can recover part of the VAT it incurs on expenditure. The financial statements include VAT to the extent that it is suffered by the Group and not recoverable from HM Revenue and Customs. Recoverable VAT arises from partially exempt activities and is credited to the statement of comprehensive income.

Factors that may affect future tax charges

The standard rate of corporation tax in the UK remained at 19% in 2023. From 1 April 2023 the corporation tax rate increased to 25% on profits over £250k and 19% on profits under £50k with marginal relief applied for profits between the two limits.


Group and not recoverable from HM Revenue and
Customs. Recoverable VAT arises from partially
exempt activities and is credited to the statement of
comprehensive income.

relief a
pplied for profts betwe
en the two limits.
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
CURRENT TAX
Current tax on income for the period
Adjustment in respect of previous periods
Total current tax
Deferred tax expense
Adjustment in respect of previous periods		 0.6
0.7
0.4
-		 0.1
0.3
0.6
-
1.0
0.7		 0.7
0.3
(0.6)
(0.6)
(0.8)
-		 (0.1)
(0.3)
-
-
(0.4)
0.1		 0.6
-
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
CURRENT TAX RECONCILIATION
Surplus / (Defcit) on ordinary activities before taxation
Less surplus from charitable activities
Taxable surplus on ordinary activities before tax
Corporation tax charged at 25% (2023: 19%)
EFFECTS OF
Qualifying charitable donations paid or to be paid within 9
months of the year end
Share of taxable profts in Triathlon Homes LLP
Adjustment in respect of prior periods
Total tax charge (see above)		 12.8
90.9
(7.3)
(76.1)
5.5
14.8
1.4
2.8
(1.2)
(2.5)
0.4
0.4
(1.0)
(0.6)		 (0.2)
77.9
0.2
(76.1)
-
1.8
-
0.3
-
-
-
-
0.6
(0.3)
(0.4)
0.1		 0.6
-

Southern Housing Annual Report 2023-24

Financial Statements

105

13. Tangible fixed assets – housing properties

Housing properties constructed or acquired (including land) on the open market are stated at cost less depreciation and impairment (where applicable).

The cost of housing land and property represents their purchase price and any directly attributable costs of acquisition which may include an appropriate amount for incremental staff costs and other costs of managing the development. Directly attributable costs of acquisition include capitalised interest calculated on a proportional basis using finance costs on borrowing drawn to finance the relevant construction or acquisition. Where housing properties are in the course of construction, finance costs are only capitalised where construction is on-going and has not been interrupted or terminated.

Expenditure on major refurbishment to properties is capitalised where the works increase the net rental stream over the life of the property. An increase in the net rental stream may arise through an increase in the net rental income, a reduction in future maintenance costs, or a subsequent extension in the life of the property. All other repair and replacement expenditure is charged to the statement of comprehensive income.

Housing properties in the course of construction, excluding the estimated cost of the element of shared ownership properties expected to be sold in the first tranche, are included in property, plant and equipment and held at cost less any impairment. They are transferred to completed properties when ready for letting. Expenditure on schemes, which are subsequently aborted, is written off in the period in which it is recognised the scheme will not be developed to completion. The portion of shared ownership property retained or expected to be retained is not depreciated on account of the high residual value.

Gains and losses on disposals of housing properties are determined by comparing the proceeds with the carrying amount and incidental costs of sales and recognised within gain/loss on disposal of fixed assets, which is included in the operating surplus for the year in the statement of comprehensive income.

Impairment

The housing property portfolio for the Group is assessed for indicators of impairment at each balance sheet date. Where indicators are identified then a detailed assessment is undertaken to compare the carrying amount of assets or cash generating units for which impairment is indicated to their recoverable amounts. An options appraisal is carried out to determine the option which produces the highest net realisable value. Valuations on rental return or potential sale proceeds are obtained and used to inform the options. The recoverable amount is taken to be the higher of the fair value less costs to sell or the value in use of an asset or cash generating unit. The assessment of value in use may involve considerations of the service potential of the assets or cash generating units concerned or the present value of future cash flows to be derived appropriately adjusted to account for any restrictions on their use. Where value in use - service potential (VIU-SP) is to be determined, the calculation of depreciated replacement cost compares a rebuild cost (using floor space, an average build cost per square metre and an average grant per unit) with expectations of price for an asset with equivalent service potential on the open market. The lower of the replacement costs is then adjusted as if that cost had been depreciated for the life of the asset.

The Group defines cash generating units as follows:

Where the recoverable amount of an asset or cash generating unit is lower than its carrying value an impairment is recorded through a charge to the statement of comprehensive income.

In 2023/24 assets impaired include land purchased ahead of a scheme being identified or planning permission granted, but where the land value has fallen since it was acquired or estimated disposal value. The value has been assessed based on the anticipated level of affordable housing for which planning permission will be given. The carrying value of the land prior to recognition of the impairment was £36 million.

Southern Housing Annual Report 2023-24

Financial Statements

106

Depreciation of housing properties

Housing land and property is split between land, structure and other major components that are expected to require replacement over time. Land is not depreciated on account of its indefinite useful economic life. Assets in the course of construction are not depreciated until they are completed and ready for use to ensure they are only depreciated in periods in which economic benefits are expected to be consumed. The cost of housing property and components are depreciated over the useful economic lives of the assets on the following basis:

Donated land and other assets

Land and other assets donated by local authorities and other government sources are added to cost at the fair value of the land at the time of the donation. Where the land is not related to a specific development and is donated by a public body an amount equivalent to the increase in value between fair value and consideration paid is treated as a non-monetary grant and recognised in the balance sheet as a liability. Where the donation is from a non-public source the value of the donation is included as income.

Stock swaps

economic lives of the assets on the following basis:
COMPONENT Years
Structure 85-125
Lifts 25-30
Kitchens
Bathrooms		 20-25
20-30
Solar panels 20
External storage 10
External staircase 60
Aerials /CCTV 10
Flooring
Windows		 15
25-30
Roofs 20-80
Fire alarms 15-20
Doors
Boilers & heating
Emergency lighting
Electrical wiring		 15-30
15-25
15-20
5-30
Warden call / door entry 15

Leasehold properties are depreciated over the length of the lease except where the expected useful economic life of properties is shorter than the lease, the lease and building elements are depreciated separately over their expected useful economic lives.

Allocation of costs for mixed tenure and shared ownership developments

Costs are allocated to the appropriate tenure where it is possible to specify which tenure the expense relates to. Where it is not possible to relate costs to a specific tenure, costs are allocated on a floor area or unit basis depending on what is appropriate for each scheme.

Housing properties acquired from other social landlords in exchange for non-monetary assets, or a combination of monetary and non-monetary assets, are measured at fair value. Grant associated with the transfers is recorded as a contingent liability.

Shared ownership properties and staircasing

Under low cost home ownership arrangements, the Group disposes of a long lease on low cost home ownership housing units for a share ranging between 10% and 75% of value. The Buyer has the right to purchase further proportions up to 100% based on the market valuation of the property at the time each purchase transaction is completed.

Low cost home ownership properties are split proportionately between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover. The remaining “staircasing element”, is classed as property, plant and equipment and included in completed housing property at cost together with any provision for impairment. Sales of subsequent tranches are treated as a part disposal of property, plant and equipment. Such staircasing sales may result in capital grant being deferred or abated and any abatement is credited in the sale account in arriving at the surplus or deficit.

The Group maintains shared ownership properties to a sound state of repair where it has the responsibility to do so. Maintenance of other shared ownership properties is the responsibility of the shared owner. Any impairment in the value of such properties is charged to the statement of comprehensive income.

Southern Housing Annual Report 2023-24

Financial Statements 107

GROUP
Housing
properties
held for
letting
£m		 Housing
properties
for letting
under
construction
£m		 Completed
shared
ownership
properties
£m		 Shared
ownership
properties
under
construction
£m		 Total
housing
properties
£m
COST
At 1 April 2023
5,072.7
Reclassify other fxed assets
11.4
Reclassify to impairment
-
Reclassify to depreciation
2.4
Additions during year
5.1
Replaced components
94.9
Tenure change
(1.0)
Transfer on completion
109.5
Disposals - property
(13.4)
Demolition
(5.1)
Disposals - components
(14.0)		 415.4
-
-
(2.9)
146.9
-
-
(109.5)
-
-
-		 894.8
15.0
-
(2.6)
4.9
-
1.0
98.1
(25.3)
(0.1)
-		 211.4
-
1.1
(0.1)
100.0
-
-
(98.1)
-
-
-		 6,594.3
26.4
1.1
(3.2)
256.9
94.9
-
-
(38.7)
(5.2)
(14.0)
At 31 March 2024
5,262.5		 449.9 985.8 214.3 6,912.5
DEPRECIATION
At 1 April 2023
763.7
Reclassify other fxed assets
(0.4)
Reclassify
(3.2)
Depreciation charge for the year
65.4
Disposals - property
(9.0)
Demolition
(0.6)
Disposals - components
(11.2)		 -
-
-
-
-
-
-		 27.7
4.1
-
-
(0.7)
-
-		 -
-
-
-
-
-
-		 791.4
3.7
(3.2)
65.4
(9.7)
(0.6)
(11.2)
At 31 March 2024
804.7		 - 31.1 - 835.8
IMPAIRMENT
At 1 April 2023
2.3
Reclassify from cost
-
Impairment moved to stock
-
Impairment (release)/charge for theyear
(2.3)		 18.3
-
-
2.1		 -
-
-
-		 4.5
1.1
(4.4)
-		 25.1
1.1
(4.4)
(0.2)
At 31 March 2024
-		 20.4 - 1.2 21.6
NET BOOK VALUE
At 31 March 2024
4,457.8		 429.5 954.7 213.1 6,055.1
At 31 March 2023
4,306.7		 397.1 867.1 206.9 5,777.8

The cost of land included in the above not subject to depreciation is £1,989 million (2023: £1,925 million). Additions to housing properties in the course of construction during the year included capitalised interest of £21.9 million (2023: £22.3 million) at an average interest rate during the year of in the region of 4.2% (2023: 3.8%).

The total expenditure on works to existing and acquired properties during the year was £246.8 million (2023: £133.2 million), of which £94.9 million was capitalised as component replacements, the remainder was expensed.

Tenure changes between housing properties and shared ownership relate to Homeflex stock movement following the sale of the first tranche.

Southern Housing Annual Report 2023-24

Financial Statements

108

ASSOCIATION
Housing
properties
held for
letting
£m		 Housing
properties
for letting
under
construction
£m		 Completed
shared
ownership
properties
£m		 Shared
ownership
properties
under
construction
£m		 Total
housing
properties
£m
COST
At 1 April 2023
4,973.5
Reclassify other fxed assets
11.0
Reclassify to impairment
-
Reclassify to depreciation
2.4
Additions during year
1.7
Replaced components
94.5
Acquired housing properties
50.6
Tenure change
(1.6)
Transfer on completion
89.9
Disposals - property
(13.4)
Demolition
(5.1)
Disposals - components
(14.0)		 367.4
-
-
(2.9)
114.8
-
-
-
(89.9)
-
-
-		 797.2
15.0
-
(2.6)
(0.2)
-
4.0
1.6
63.0
(25.2)
-
-		 153.0
-
1.1
(0.1)
49.5
-
-
-
(63.0)
-
-
-		 6,291.1
26.0
1.1
(3.2)
165.8
94.5
54.6
-
-
(38.6)
(5.1)
(14.0)
At 31 March 2024
5,189.5		 389.4 852.8 140.5 6,572.2
DEPRECIATION
At 1 April 2023
760.6
Reclassify other fxed assets
(0.4)
Reclassify
(3.2)
Depreciation charge for the year
64.9
Disposals - property
(1.1)
Demolition
(0.5)
Disposals - components
(11.2)		 -
-
-
-
-
-
-		 26.4
4.1
-
-
(0.7)
-
-		 -
-
-
-
-
-
-		 787.0
3.7
(3.2)
64.9
(1.8)
(0.5)
(11.2)
At 31 March 2024
809.1		 - 29.8 - 838.9
IMPAIRMENT
At 1 April 2023
2.3
Reclassify from cost
-
Impairment moved to stock
-
Impairment charge/(release) for theyear
(2.3)		 17.5
-
-
2.1		 -
-
-
-		 2.8
1.1
(3.9)
-		 22.6
1.1
(3.9)
(0.2)
At 31 March 2024
-		 19.6 - - 19.6
NET BOOK VALUE
At 31 March 2024
4,380.4		 369.8 823.0 140.5 5,713.7
At 31 March 2023
4,210.6		 349.9 770.8 150.2 5,481.5

The cost of land included in the above which is not subject to depreciation is £1,986 million (2023: £1,906 million). Additions to housing properties in the course of construction during the year included capitalised interest of £13.5 million (2023: £15.1 million) at an average interest rate during the year of in the region of 4.2% (2023: 3.8%).

The total expenditure on works to existing properties during the year was £245.6 million (2022: £132.2 million), of which £94.5 million was capitalised as component replacements.

Tenure changes between housing properties and shared ownership relate to Homeflex stock movement following the sale of the first tranche.

Southern Housing Annual Report 2023-24

Financial Statements 109

14. Tangible fixed assets – other fixed assets

Other tangible fixed assets, other than investment properties, are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical 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. The Group adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred if the replacement part is expected to provide incremental future benefits to the Group. The carrying amount of the replaced part is derecognised and reflected in the statement of comprehensive income. Repairs and maintenance are charged to the statement of comprehensive income during the period in which they are incurred.

Depreciation of other tangible fixed assets

Land is not depreciated. Depreciation on other assets is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

The estimated useful lives range as follows:

OTHER FIXED ASSETS Years
Freehold ofces
Furniture & ofce equipment
Computer hardware
Computer software		 50-100
5-15
3-4
3-4
Motor vehicles
Ofce improvements		 4
10
Leasehold properties Over term of lease

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within “surplus on disposal of fixed assets” in the statement of comprehensive income.

Southern Housing Annual Report 2023-24

Financial Statements

110

GROUP
Land and
building
£m		 Furniture
and ofce
equipment
£m		 Computer
equipment
and
software
£m		 Motor
vehicles
£m		 Total
£m
COST
At 1 April 2023
47.3
Reclassifcation to housing properties
(4.9)
Additions during year
0.7		 72.0
(21.5)
1.2		 40.2
-
-		 0.5
-
0.2		 160.0
(26.4)
2.1
At 31 March 2024
43.1		 51.7 40.2 0.7 135.7
DEPRECIATION
At 1 April 2023
17.4
Reclassifcation to housing properties
(1.6)
Charge for theyear
2.4		 31.0
(2.4)
3.0		 30.9
0.3
4.2		 0.3
-
0.1		 79.6
(3.7)
9.7
At 31 March 2024
18.2		 31.6 35.4 0.4 85.6
NET BOOK VALUE
At 31 March 2024
24.9		 20.1 4.8 0.3 50.1
At 31 March 2023
29.9		 41.0 9.3 0.2 80.4

The net book value of freehold land and buildings included in the above is £21.3 million (2023: £26.3 million). The net book value of leasehold buildings included in the above is £2.6 million (2023: £3.4 million).

ASSOCIATION
Land and
building
£m		 Furniture
and ofce
equipment
£m		 Computer
equipment
and
software
£m		 Motor
vehicles
£m		 Total
£m
COST
At 1 April 2023
47.2
Reclassifcation to housing properties
(4.9)
Additions during year
1.3		 70.8
(21.1)
1.2		 40.2
-
-		 0.5
-
0.2		 158.7
(26.0)
2.7
At 31 March 2024
43.6		 50.9 40.2 0.7 135.4
DEPRECIATION
At 1 April 2023
17.4
Reclassifcation to housing properties
(1.6)
Charge for theyear
2.8		 30.7
(2.4)
3.0		 30.9
0.3
4.2		 0.3
-
0.1		 79.3
(3.7)
10.1
At 31 March 2024
18.6		 31.3 35.4 0.4 85.7
NET BOOK VALUE
At 31 March 2024
25.0		 19.6 4.8 0.3 49.7
At 31 March 2023
29.8		 40.1 9.3 0.2 79.4

The net book value of freehold land and buildings included in the above is £21.3 million (2023: £26.3 million).

The net book value of leasehold buildings included in the above is £2.6 million (2023: £3.4 million).

Southern Housing Annual Report 2023-24

Financial Statements

111

15. Investment properties

Investment properties consist of commercial properties and other properties not held for social benefit or for use in the business but held for investment potential or capital appreciation. Investment properties are measured at cost on acquisition or initial recognition and subsequently at fair value at the year end, with changes in fair value recognised in the statement of comprehensive income. Fair value is determined annually by appropriately qualified external valuers and derived from current market rents and investment property yields for comparable properties, adjusted if necessary for any difference in the nature, location or condition of the specific asset. No depreciation is provided on investment properties.

The Group’s investment properties are valued annually on 31 March at fair value. The Group engaged Jones Lang LaSalle Limited, Resolution Property Surveyors and Copping Joyce for the latest fair value valuation. They are independent, professionally qualified valuers and valuation is undertaken in accordance with the Royal Institution of Chartered Surveyors’ Appraisal and Valuation Manual. Changes in fair value are recognised in the statement of comprehensive income. Investment properties make up less than 5% of our asset portfolio. We update the investment property valuations annually.

The investment properties include £54.4 million attributable to properties currently under construction. These properties are measured at cost. The difference between the cost and fair value of these properties is not considered material and therefore not separately recognised in the financial statements.

Jones Lang LaSalle Limited (JLL) and Resolution Property Surveyors for the latest fair value valuation. They are independent, professionally qualified valuers and valuation is undertaken in accordance with the Royal Institution of Chartered Surveyors’ Appraisal and Valuation Manual. Changes in fair value are recognised in the statement of comprehensive income. Investment properties make up less than 5% of our asset portfolio. We update the investment property valuations annually.

Rental deductions for void losses were reflected as bottom line deductions from fair value rather than being reflected via the cashflow calculation.

Valuers benchmarked 2024/25 rents with competing schemes. Assumptions reflects the market approach a potential purchaser would take, as at the valuation date. Discount rates in valuing our student properties range from 7.55% and 22.35%. The cash flows generated incorporate growth assumptions in respect of income and expenditure elements based upon deviations from the RPI trend rate of inflation (2.5%) plus additional real growth (0.5%).

A rent capitalisation methodology was adopted coupled with an assessment of what an owneroccupier might pay with reference to respective rental and capital value markets. Where appropriate, for offices with obvious permitted development credentials, a high level residual appraisal was undertaken to underpin the valuation.

The deficit on revaluation of investment property arising of £31.7 million (2023 surplus of £0.1 million) has been included in the statement of comprehensive income for the year.

The Group’s investment properties are valued annually on 31 March at fair value. The Group engaged


statements.
The Group’s investment properties are valued
annually on 31 March at fair value. The Group engaged
as been incuded in te statem
income for the year.		 ent o compreensive
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
At 1 April
325.4
311.5
Additions
7.3
15.3
Transferred to fxed assets
-
(3.8)
Transfer (to)/from stock
(10.3)
2.3
Revaluation inyear
(31.7)
0.1		 242.0
242.8
-
1.1
-
(4.4)
(2.2)
2.3
(20.3)
0.2
At 31 March
290.7
325.4		 219.5
242.0

Southern Housing Annual Report 2023-24

Financial Statements

112

16. Investments

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost less impairment in the individual entity’s financial statements.

Associates and joint venture

An entity is treated as an associated undertaking where Southern Housing or the relevant subsidiary exercises significant influence in that it has the power to participate in the operating and financial policy decisions.

An entity is treated as a joint venture where the Group is party to a contractual agreement with one or more parties from outside the Group to undertake an economic activity that is subject to joint control.

In the consolidated accounts, interests in joint ventures are accounted for using the equity method of accounting. Under this method an equity investment is initially recognised at the transaction price (including transaction costs) and is subsequently adjusted to

reflect the investor’s share of the profit or loss, other comprehensive income and equity of the joint venture. The consolidated statement of comprehensive income includes the Group’s share of the operating results, interest, pre-tax results and attributable taxation of such undertakings applying accounting policies consistent with those of the Group. Any share of losses are only recognised to the extent that they do not reduce the investment balance below zero as the Group has no obligations to make payments on behalf of the joint venture, and any share of subsequent profits shall be accounted for once the unrecognised profits are equal to the unrecognised losses. In the consolidated balance sheet, the interests in joint ventures are shown as the Group’s share of the identifiable net assets, including any unamortised premium paid on acquisition. Any unrealised profits and losses from transactions between the Group and the joint venture are eliminated to the extent of the Group’s interest in the joint venture.

2024 2023
GROUP £m £m
At 1 April 0.1 2.2
Distribution received - (2.8)
Cumulative share ofjoint ventureproft
At 31 March		 0.1
0.2		 0.7
0.1

In December 2018 Optivo Homes Limited, a subsidiary of Southern Housing, entered into an agreement with Galliford Try Homes Limited (now Vistry Linden Limited) to become a member of Linden (Rainham) LLP. Each party holds a 50% interest in the LLP and 50% of the voting rights. Linden (Rainham) LLP´s principal activity is the development of new homes.

Southern Housing Annual Report 2023-24

Financial Statements 113

Southern Housing 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.

AFFINITY AND TRIATHLON
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
At 1 April
6.9
3.0
Additional loan
0.3
-
Cumulative share ofjoint ventureproft
1.3
3.9		 3.6
3.6
0.2
-
-
-
At 31 March
8.5
6.9		 3.8
3.6

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, which is not materially different.

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.

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Investment in subsidiary
Investment in social HomeBuy		 -
-
6.8
6.9		 1.8
3.5
6.8
6.9
6.8
6.9		 8.6
10.4

Southern Housing Annual Report 2023-24

Financial Statements

114

Unlisted investment

The unlisted investments comprised 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 at fair value.

The endowment is held by Fellowship Houses Trust at fair value.
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Fair value of endowment
0.2
-		 -
-

Derivatives

The Group holds floating rate loans which expose the Group to interest rate risk. To mitigate against this risk the Group uses interest rate swaps. These instruments are measured at fair value at each reporting date. They are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Movements in fair value are recognised in the statement of comprehensive income. The derivatives are accounted for in accordance with FRS 102 – Section 12 at fair value through profit or loss.

with FRS 102 – Section 12 at fair value through proft or loss.
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
MARK TO MARKET DERIVATIVES
Asset
Liability		 21.7
21.0
(9.0)
(7.2)		 21.7
21.3
(8.9)
(7.2)
12.7
13.8		 12.8
14.1

Southern Housing Annual Report 2023-24

Financial Statements

115

17. Properties held for sale

Stock represents work in progress, completed properties developed for outright sale and shared ownership properties. For shared ownership properties the value held as stock is the estimated proportion of cost to be sold as a first tranche. Stock is stated at the lower of cost and net realisable value. Cost comprises materials, direct labour and direct development overheads. Net realisable value is based on estimated sales proceeds after allowing for all further costs to completion and selling costs.

allowing for all further costs to completion and selling costs.
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Open market sale: completed properties
Open market sale: under construction properties
Shared ownership: completed properties
Shared owenership: under construction properties		 16.7
3.4
45.5
57.0
33.7
31.2
54.2
83.6		 -
-
-
-
20.7
11.4
43.9
47.2
150.1
175.2		 64.6
58.6

18. Trade and other debtors

Debtors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the statement of comprehensive income in other operating expenses.

Liquidity fund

In accordance our borrowing agreements we maintain a Liquidity Reserve Fund with the lender. The Reserve Fund is equal to not less that twelve months’ interest.

is equal to not less that twelve months’ interest.
GROUP GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
DUE WITHIN ONE YEAR
Rental and service charge arrears
Provision for doubtful debts
Social housing grant receivable
Trade debtors
Other debtors
Amounts owed by subsidiary undertakings
Prepayments and accrued income
VAT
DUE AFTER MORE THAN ONE YEAR
Leaseback schemes
Service charge debtor
Liquidity fund
Amounts owed by subsidiary undertakings
TOTAL DEBTORS		 43.5
26.5
(7.6)
(7.8)		 42.5
25.8
(7.5)
(7.8)
35.9
18.7		 35.0
18.0
0.2
0.5
19.3
24.4
5.3
5.7
-
-
15.3
21.3
0.3
6.3		 0.2
0.5
17.8
8.6
4.4
4.6
2.2
300.5
13.1
21.2
-
1.3
76.3
76.9		 72.7
354.7
1.4
1.7
19.3
11.8
13.6
12.2
-
-		 1.4
1.7
19.3
11.8
13.6
12.0
431.9
60.2
34.3
25.7		 466.2
85.7
110.6
102.6		 538.9
440.4

Southern Housing Annual Report 2023-24

Financial Statements 116

19. Short term investments

There were no deposits not accessible within 3 months (2023: £Nil).

20. Cash and cash equivalents

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Cash and cash equivalents
109.0
146.1		 98.4
127.3

Total Group cash balance of £109.0 million (2023: £146.1 million) includes £33.0 million (2023: £28.7 million) held in separate accounts for ‘ring-fenced’ sinking funds on behalf of leaseholders, £7.7 million held for South East Consortium (2023: £5.4 million) and restricted cash £16.4 million (2023: £16.2 million) which is mainly collateral for our Pensions.

21. Creditors: amounts falling due within one year

Trade and other creditors and housing loans are carried at amortised cost.

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Loans and borrowings (note 25)
Social housing grant (note 23)
Interest payable
Taxation and social security
Rent & service charge in advance
Accruals and deferred income
Amounts due to subsidiary undertakings
Other creditors
Recycled capital grant fund (note 24)		 35.2
67.4
19.5
13.3
24.1
10.9
3.0
7.9
49.6
41.2
154.4
161.9
-
-
3.3
2.0
27.1
14.5		 35.2
67.4
19.5
13.2
23.4
10.2
2.9
3.7
48.3
39.6
146.4
139.4
1.2
4.8
3.3
2.0
26.9
14.3
316.2
319.1		 307.1
294.6

Southern Housing Annual Report 2023-24

Financial Statements 117

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

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Loans and borrowings (note 25)
Social housing grant (note 23)
Derivative fnancial instruments
Lease premium grant subsidy
Service charge creditor
Recycled capital grant fund (note 24)
Other creditors		 3,095.8
2,842.1
1,655.4
1,696.5
9.0
7.2
0.1
0.2
2.0
2.0
20.0
28.5
14.2
20.4		 3,144.6
2,852.8
1,611.0
1,647.5
8.9
7.2
0.1
0.2
2.0
2.0
19.3
27.7
14.0
20.4
4,796.5
4,596.9		 4,799.9
4,557.8

23. 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 between 85 -125 years.

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
TOTAL SOCIAL HOUSING GRANT RECEIVED OR RECEIVABLE
Capital grant - housing properties
Recycled capital grant fund (note 24)
Cumulative amount amortised
At 1 April
Grants received during the year
Grants repaid during the year
Grant recycled
Intra group transfers
Disposals
Grants amortised duringtheyear		 1,674.9
1,709.8
47.1
43.0
390.9
370.3		 1,630.5
1,660.7
46.2
42.0
388.6
365.6
2,112.9
2,123.1		 2,065.3
2,068.3
1,709.9
1,711.0
1.1
47.0
(5.1)
-
-
2.7
-
-
(12.1)
(31.5)
(18.9)
(19.4)		 1,660.7
1,685.4
0.6
36.4
-
-
-
-
0.5
(10.7)
(12.3)
(31.1)
(19.0)
(19.3)
At 31 March 1,674.9
1,709.8		 1,630.5
1,660.7
Cumulative amount amortised 390.9
370.3		 388.6
365.6

Southern Housing Annual Report 2023-24

Financial Statements

118

24. Recycled Capital Grant Fund (RCGF)

On the occurrence of certain relevant events, primarily the sale of dwellings, the Regulator of Social Housing (RSH) can direct the Association to recycle or repay capital grants. The Group adopts a policy of recycling, for which a separate fund is maintained. If unused within a three year period, grant will be repayable to the RSH with interest. Any unused recycled capital grant held within the recycled capital grant fund, which it is anticipated cannot be used within one year is held in the balance sheet under “creditors due after more than one year”. The remainder is held under “creditors due within one year”.

remainder is held under “creditors due within one year”.
GROUP 2024
Homes
England
£m
2024
GLA
£m		 2023
Homes
England
£m
2023
GLA
£m
Balance at 1 April
Grants recycled
Interest accrued
Grants repaid		 15.5
27.5
3.8
4.8
0.8
1.6
-
(6.9)		 14.1
23.3
2.0
5.3
0.4
0.6
(1.0)
(1.7)
At 31 March 20.1
27.0		 15.5
27.5
AMOUNT DUE FOR REPAYMENT TO HOMES ENGLAND/GLA
Within one year
Within 2 to 3 years		 12.4
14.7
7.7
12.3		 0.2
14.3
15.3
13.2
20.1
27.0		 15.5
27.5
ASSOCIATION 2024
Homes
England
£m
2024
GLA
£m		 2023
Homes
England
£m
2023
GLA
£m
At 1 April
Grants recycled
Transfers
Interest accrued
Grants repaid		 15.4
26.6
3.8
4.7
0.1
0.2
0.8
1.5
-
(6.9)		 14.0
22.8
2.0
4.7
-
0.2
0.4
0.6
(1.0)
(1.7)
At 31 March 20.1
26.1		 15.4
26.6
AMOUNT DUE FOR REPAYMENT TO HOMES ENGLAND/GLA
Within one year
Within 2 to 3 years		 12.3
14.6
7.8
11.5		 0.2
14.1
15.2
12.5
20.1
26.1		 15.4
26.6

Southern Housing Annual Report 2023-24

Financial Statements 119

25. Loans and borrowings

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
HOUSING LOANS REPAYABLE
Loans and debentures
1,342.5
1,343.9
Bond
1,825.0
1,506.5
Total housing loans
3,167.5
2,850.4
Inter-company loan
-
-
Other loan/ bond costs
(19.6)
77.4
Deferred fnancing& set-upcosts
(16.9)
(18.3)		 1,342.3
1,343.6
675.0
675.0
2,017.3
2,018.6
1,198.9
916.5
(19.5)
(1.9)
(16.9)
(13.0)

Net borrowings
3,131.0
2,909.5		 3,179.8
2,920.2
HOUSING LOANS REPAYABLE
Within one year
35.2
67.4
One to two years
27.3
36.8
Two to fve years
587.2
447.3
More than fveyears
2,517.8
2,298.9		 35.2
67.4
27.3
36.8
587.2
447.3
1,367.6
1,467.1

Net borrowings
3,167.5
2,850.4		 2,017.3
2,018.6

Other loan/bond costs includes any discount (or premium) on bonds issued in the period.

At 31 March 2024 the Groups facilities were as below. During the year our drawn facilities increased by £317.1 million.

£317.1 million.
GROUP
2024
£m		 2023
£m
TOTAL FACILITIES
4,033.3
of which own name bonds
1,825.0
of which banks and other
lenders
2,208.3
TOTAL FACILITIES
4,033.3
of which drawn
3,167.5
of which available to draw
865.8
of which unavailable to draw
-
Retained bonds
-		 4,214.1
1,506.5
2,707.6
4,214.1
2,850.4
1,238.7
125.0
118.5
GROUP
2024
£m		 2023
£m
DRAWN FACILITIES
3,167.5
of which fxed rate
2,792.2
of which foating rate
365.3
of which index linked
10.0		 2,850.4
2,475.7
364.7
10.0

The loans bear interest at fixed rates ranging from 1.25% to 11.5% or at variable rates calculated at a margin above SONIA, the Bank of England Base Rate, or the Retail Prices Index. We measure interest rate sensitivity with Macaulay Duration, which was 8.5 years.

The Group has interest rate swap agreements in place to mitigate the risk of interest rate increases in its floating rate debt. We had vanilla swaps of £225.5 million notional value (2023: £74.6 million), amortising swaps of £160.0 million notional value (2023: £160.0 million), as well as forward starting swaps of £30.0 million notional value (2023: £30.0 million).

The mark to market of the swaps is £12.7 million (2023: £13.8 million). Our swaps have a maturity range of 2026-2038 and a pay fixed rate range of 1.69% to 5.10%. The average rate, weighted by notional value of swaps active at year end, was 3.48% (2023: 2.74%). During 2023/24, Southern Housing entered into £150 million of vanilla swaps.

Southern Housing Annual Report 2023-24

Financial Statements

120

BOND MATURITY
October
2035		 October
2036		 February
2039		 March
2043		 October
2047		 March
2048
Coupon
2.86%
Issue size (£m)
350
Remaining retained (£m)
-
Valuation date
May 2023
Valuation before asset cover (£m)
484
Valuation after asset cover (£m)
427
Company issuing
SH is Southern Housing and OFP is Optivo Finance PLC
OFP		 2.38%
300
-
Oct 2023
437
387
SH		 4.50%
75
-
Oct 2023
110
97
SH		 5.25%
400
-
Jul 2023
461
405
OFP		 3.50%
300
-
Oct 2023
437
386
SH		 3.28%
400
-
Nov 2023
488
426
OFP

At 31 March 2024 we had £1,825 million bonds in issue (2023: £1,625 million). None of these were retained bonds (2023: £118.5 million). In June 2023 we sold £30 million of our sustainable linked retained 2036 bonds. In July 2023 we repurchased and cancelled £50 million of our 2044 bond. In August 2023 we sold the remaining £20 million 2036 retained bonds. Also in August 2023, we sold our remaining £69 million retained 2035 bond. In September, we tapped both our 2043 and 2048 bonds to issue further £100 million and £150 million respectively. Both amounts were retained for future sale. The £100 million 2043 retained bonds were then sold in September 2023. The £150 million 2048 retained bonds were sold in November 2023.

At 31 March 2024, 44,554 (2023: 45,712) homes are charged as security to lenders valued at £6.3 billion (2023: £5.8 billion) and a gross book value of £5.8 billion (2023: £5.6 billion) (based on a mix of existing use value – social housing (EUV-SH) and market values subject to tenancies (MV-T)). Homes are charged to derivative counterparties to meet our mark to market exposure to the extent that this exceeds a threshold agreed between the counterparties.

The Board recognises a key risk faced by the Group relates to the ability of the Association to repay loans as they fall due. The Association is exposed to fluctuations in interest rates. The key risks and mitigation strategies are:

Southern Housing Annual Report 2023-24

Financial Statements 121

26. Provisions

A provision is only recognised for specific and quantifiable liabilities that exist at the balance sheet date as a result of a past event and only where it is probable that we will be required to transfer economic benefits in settlement of the obligation.

Provisions are made when expenditure required to settle the obligation at the balance sheet date can be reliably measured. Where the effect of the time value of money is material the amount expected to be required to settle the obligation is recognised at the present value using a discount rate. The unwinding of the discount is recognised as a finance cost in income and expenditure in the period it arises. Southern Housing reviews at each reporting date the identified risks it is aware of to ensure the value of provisions made is appropriate.

We have a comprehensive fire works programme with spend divided between remediating defects at the time of original construction and enhancement works required if the blocks were built today. We’ve determined our constructive obligation to carry out future works is at the point when we formally notify

residents of the start date for remediation works to commence. This is after we have completed a PAS9980 survey which has then been used to inform the works required and have determined the cost of those works. We apply this policy to both rented homes and shared ownership / leasehold homes. For rented and shared ownership homes remediation works are charged to the Statement of Comprehensive Income (SOCI), enhancement works are capitalised. For leasehold homes all costs are charged to the SOCI.

We’ve set aside an £8 million specific provision against the £27 million loan balance in Association relating to recoverability of the intercompany loan to Lamborn Estates.

Provisions are not made for works which are considered to be part of the ordinary course of business and that form part of an ongoing maintenance and major works programme. Where settlement is not probable and / or cannot be reliably estimated a contingent liability is recognised.

THE GROUP HAS RECOGNISED GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
Fire safety provisions
Hand back provisions
Loan loss provision		 1.0
-
0.4
1.6
-
-		 1.0
-
0.3
1.6
8.0
-
1.4
1.6		 9.3
1.6

Southern Housing Annual Report 2023-24

Financial Statements

122

27. Contingent liabilities and assets

Contingent liability

A contingent liability is disclosed for a possible obligation for which it is not yet confirmed that an obligation exists that could lead to an outflow of resources; or for a present obligation that does not meet the definitions of a provision as it is not probable that an outflow of resources will be required to settle the obligation or when a sufficiently reliable estimate of the amount cannot be made.

A contingent liability exists on grant repayment which is dependent on the disposal of the related property. The timing of any future disposal is uncertain. No provision has therefore been recognised in these financial statements in relation to any potential repayment of grant that may arise in the event of a disposal. The Group holds £161.3 million of grant (2023: £159.2 million) relating to stock swaps which would be repayable to the grant provider in the event that this stock is disposed.

A contingent liability exists in relation to defects in external wall construction and cladding of existing blocks of flats.

Southern Housing uses PAS9980 assessments which provide the methodology for the fire risk appraisal of external wall construction and cladding of existing multi-storey and multi-occupied residential buildings. We’ve provided for fire remediation works to be carried out in 2024/25 where we can reliably estimate costs and where a constructive obligation exists. There is a possible, but uncertain obligation in relation to buildings where a PAS9980 assessment has not

yet been performed. In line with Building Safety Act 2022, Southern Housing’s Board has approved that Southern Housing will not recharge leaseholders for remediation works identified by our PAS9980 assessments.

A contingent liability exists on Optivo Pension Scheme (OPS) liabilities as we have been notified by the Trustee of the OPS that it has performed a review of the changes made to the Scheme’s benefits over the years and the result is that there is uncertainty surrounding some of these changes. The Trustee has been advised to seek clarification from the Court on these items. This process is ongoing and the matter is unlikely to be resolved before the end of 2024 at the earliest. It is recognised that this could potentially impact the value of the OPS liabilities, but until Court directions are received, it is not possible to calculate the impact of this issue with any accuracy at this time. No adjustment has been made in these financial statements in respect of this potential issue. We estimate the additional liability to be £3 million, 4% of scheme liabilities.

Contingent asset

A contingent asset is disclosed where a possible asset arises from past events and whose existence will only be confirmed by the occurrence of uncertain future events. We have spent £1.9 million decanting residents from a defective scheme. We intend to claim these costs from the developer but currently do not meet the conditions of FRS102 to account for these costs as a debtor.

28. Non-equity share capital

Every member of the Association holds one share of £1. These shares carry no dividend rights and, on cessation of membership of the Association, are cancelled and the amount paid becomes the property of the Association. Each member has the right to vote at members’ meetings.

ASSOCIATION
2024
£		 2023
£
At 1 April
31
Cancelled inyear
(2)		 58
(27)
At 31 March
29		 31

Southern Housing Annual Report 2023-24

Financial Statements 123

29. Capital commitments

The amount contracted for at 31 March 2024 will be funded from grants approved by Homes England / GLA 3% (2023: 6%) or will be financed from property sales 49% (2023: 45%) and private loans / cash generated from the business 47% (2023: 49%). Under regulations approved by Board, expenditure to certain levels may be authorised by appropriate officers, and such authorised expenditure is included above.

GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
EXPENDITURE ON DEVELOPMENTS
Capital expenditure contracted for but not
provided for in the fnancial statement
530.9
665.1
Capital expenditure which has been authorised
by the Board but not yet contracted for
31.9
116.1		 153.8
223.3
-
17.1

30. Commitments under operating leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group. All other leases are classified as operating leases. Rentals paid under operating leases are charged to the statement of comprehensive income on the accruals basis. Where assets are financed by leasing agreements that give rights approximating to ownership they are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments (or if lower the fair value of leased asset) and is depreciated in accordance with the Group’s normal policy for that class of assets. The corresponding liability to the lessor is included in the Balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation using the effective interest method so as to achieve a constant rate of interest on the remaining balance of the liability. Annual rentals on operating leases are charged to the statement of comprehensive income on a straight-line basis over the term of the lease.

At 31 March 2024 the Group and Association had total commitments under non-cancellable operating leases as follows:

follows:
GROUP
2024
£m
2023
£m		 ASSOCIATION
2024
£m
2023
£m
LAND AND BUILDINGS
Leases expiring within one year
One to fve years
Over fve years
OTHER
Leases expiring within one year
One to fve years		 1.1
1.2
3.3
3.3
3.9
4.5		 1.1
1.1
3.3
3.3
3.9
4.5
8.3
9.0		 8.3
8.9
1.4
0.8
1.1
1.3		 1.4
0.8
1.1
1.3
2.5
2.1		 2.5
2.1
Total 10.8
11.1		 10.8
11.0

Southern Housing Annual Report 2023-24

Financial Statements

124

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.

GROUP
2024
£m		 2023
£m
MINIMUM AMOUNTS DUE WITHIN
Expiring within one year
2.5
One to fve years
6.2
Over fveyears
5.8		 2.2
6.4
4.0

14.5		 12.6

Sales and leaseback schemes

The group has a leasehold interest in properties which have been subsequently leased back to the respective freeholders for the purpose of providing housing accommodation. The Group’s net investment in these properties is disclosed in the Balance Sheet under “debtors”. The balance of the Group’s investment in these properties is written down as lease payments are received.

The Group’s future minimum operating lease receipts from commercial properties under non-cancellable arrangements were:

Southern Housing Annual Report 2023-24

Financial Statements

125

31. Related party disclosures

The ultimate controlling party of the Group is Southern Housing, a registered social housing provider. There is no ultimate controlling party of Southern Housing. Southern Housing considers the key management personnel to be the Board and Executive Team. The only transaction between Southern Housing and the key management personnel is remuneration which is set out in notes 7 and 8.

Southern Housing participates in five defined benefit pension schemes. The transactions with these pension schemes are set out in note 32.

The following managed undertakings are subsidiaries by virtue of the ability of the Association to control the composition of their Board or by holding the majority of shares. The Association owns 100% of the shares of each of the undertakings listed. In accordance with financial reporting standards, the results of the undertakings are incorporated in the consolidated accounts. Where indicated, subsidiaries are Registered Providers of Social Housing (RPSH).

Housing (RPSH).
Name of
undertaking		 Country of
registration		 Principal
activity
Amicus Group Ltd
Optivo Finance Plc
Crystal Palace Housing Association Ltd
Eason Gruaz Homes
The Fresh Visions People Ltd
Charity of Julia Spicer for Almshouse
Lamborn Estates Ltd
Middlesex First Ltd
Optivo Development Services Ltd
Optivo Homes Ltd
Optivo Enterprise Ltd
Southern Home Ownership Limited
Southern Space Limited
Southern Development Services Limited
Spruce Homes Limited
Southern Housing Construction Limited
The Fellowship Houses Trust
Hewitt Homes
Samuel Lewis Foundation
Afnity Housing Services (Reading)
Afnity (Reading) Holdings Limited
Triathlon Homes LLP
Afnity Housing Services (Reading)
Afnity (Reading) Holdings Limited
Triathlon Homes LLP		 UK RPSH
UK PLC
UK RPSH
UK Charity
UK Charity
UK RPSH
UK
UK
UK
UK
UK
UK RPSH
UK
UK
UK
UK
UK RPSH
UK RPSH
UK Charity
UK
UK
UK
UK
UK
UK		 Registered social housing provider
Bond issuing vehicle
Registered social housing provider
Social housing provider
Registered Charity
Registered social housing provider
Property development
Manages student accommodation
Property development
Holding company
Dormant
Registered social housing provider
Vehicle for the one-third share in Triathlon Home
LLP
Property development
Provision of housing for private rent
Property development
Registered social housing provider
Registered social housing provider
Provision of housing
50% Joint venture with Abri Group
33% shares directly and 16.67% via Afnity
Housing Services (reading). Joint venture with
Yarlington Housing Group
33% partnership via Southern Space Limited.
Joint venture entity with First Base 4 Stratford
LLP and East Place Limited
50% Joint venture with Abri Group
33% share directly and 16.67% via Afnity
Housing Services (Reading). Joint venture with
Yarlington Housing Group
33% partnership via Southern Space Limited.
Joint venture entity with First Base 4 Stratford
LLP and East Place Limited

Southern Housing Annual Report 2023-24

Financial Statements

126

Investments

Investments
2024
£m		 2023
£m
AMOUNTS OWED BY RELATED PARTIES AT YEAR END
Joint venture with Linden Homes
0.2
Loan due from Afnity Reading (Holdings) Limited
2.6
Debtors due from Triathlon Homes LLP
5.1		 0.1
2.3
3.7

Linden (Rainham) LLP

Optivo Homes Limited, a subsidiary of the Group, is a member of Linden (Rainham) LLP, a 50:50 joint venture established with Galliford Try Homes Limited (now Vistry Linden Ltd) to develop a scheme. The Group received £Nil (2023: £2.1 million) from the joint venture in the year and made no contributions (2023: £Nil).

Ink Development Company Limited

The Association is a member of Ink Development Company Limited, a vehicle set up with West Kent Housing Association to jointly acquire sites and develop schemes. The following transactions took place during the year:

Association to jointly acquire sites and develop schemes. The following transactions took place during the year:
2024
£m		 2023
£m
Net sales and purchase of goods and services
-
Debtors due to Ink Development Company Limited
1.0
Creditor due from Ink Development Company Limited
1.1
Administration fees
-		 2.9
1.0
0.9
0.1

Management services

The Association provides central management services to its subsidiaries. The quantum of charges applied for these services to each subsidiary is as follows:

these services to each subsidiary is as follows:
2024
£m		 2023
£m
Optivo Development Services Ltd
2.9
Lamborn Estates Ltd
-
Crystal Palace Housing Association Ltd
0.2
Southern Home Ownership Limited
0.5
Spruce Homes Limited
0.2
The FellowshipHouses Trust
0.1		 2.6
0.1
0.2
-
0.2
-
Total
3.9		 3.1

Southern Housing Annual Report 2023-24

Financial Statements

127

The Association transacted with the following entities which are not themselves registered providers:

Name of undertaking
Name of the transaction		 2024
£m		 2023
£m
Optivo Finance Plc
Inter-company loan to Southern Housing
bond issue
concessionary loan
Optivo Development Services Ltd
Development cash fow
Lamborn Estates Ltd
Inter-company loan
Southern Housing Construction Limited
Inter-company loan
Spruce Homes Limited
Inter-company loan
Triathlon Homes LLP
Provision of administrative services		 (318.5)
-
(117.7)
26.3
1.0
0.9
0.7		 (81.5)
(2.0)
(86.4)
17.0
2.7
1.0
2.5

Interest on the Optivo Finance plc loan is £38.1 million (2023: £33.6 million) and is charged at the same equivalent rate of the external loans with no mark up by Optivo Finance plc.

Interest on the Lamborn Estates Ltd loan is charged at SONIA plus 5%. Interest charged in the year was £2.7 million (2023: £2.5 million).

Southern Housing Annual Report 2023-24

Financial Statements 128

Samuel Lewis Foundation

The Samuel Lewis Foundation is a separate charity with Southern Housing 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. This disclosure is given for reporting purposes to the Charity Commission. Expenditure on letting activities comprises 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 ring fenced for the specific charitable purposes of the Samuel Lewis Foundation.

Date of
acquisition		 Original
cost
£m		 Number of
units
Liverpool Road
1910
Jubilee Cottages
1935
Palliser Road
1927
Beech House
1936		 0.3
0.7
1.0
0.7		 247
28
36
10
Fund balances are represented by:
2024
£m		 2023
£m
Property, plant & equipment
Stock
Cash		 18.9
5.1
15.3		 17.1
1.2
15.3
Total assets less current liabilities 39.3 33.6
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Social housingand othergrants		 (6.7) (6.4)
Total net assets 32.6 27.2
NET INCOME FROM PERMANENT ENDOWED ASSETS
Income from lettings
Less expenditure on lettingactivities		 1.8
(0.3)		 1.9
(0.2)
Surplus on lettingactivities 1.5 1.7

Southern Housing Annual Report 2023-24

Financial Statements

129

32. Pension commitments

The Group operates five funded schemes and two defined contribution schemes which are used for auto enrolment. There was another funded scheme but Southern Housing exited from that scheme during 2023/24.

Defined contribution scheme

Employees have the option to join one of Southern Housing’s defined contribution schemes, to which the Group makes a contribution of up to 10% of pensionable salary. Contributions are charged to operating surplus in the year in which they become payable.

Funding schemes

Southern Housing (and/or Optivo and Southern Housing Group Limited) participated in five defined benefit schemes for its employees during the year. These were the Optivo DB Pension Scheme (OPS), Horizon Housing Group Pension Scheme (HHGPS), Southern Housing Group Pension Plan (SHGPP) and two Local Government Pension Schemes: East Sussex County Council Pension Fund (ESCC) and the Isle of Wight Pension Fund (IOW). The assets of the schemes are held separately from those of the Group and are managed by trustees. The contributions are determined on the basis of triennial valuations using the projected unit method. These schemes are all closed to new members. The latest triennial valuations were carried out as at 30 September 2020, 31 March 2020, 31 March 2021 and 31 March 2022 for the three Local Government Pension Schemes respectively.

During the year, Southern Housing also participated in The Local Government Pension Scheme: Kent County Council Pension Fund (KCC). Participation ceased on 8 January 2024 and the amount due on exit from the scheme was settled during the year. The following disclosures include settlement for KCC and the ongoing liability for a small number of ‘unfunded’ pensions payable in respect of members of the scheme.

Optivo also participated in The Local Government Pension Scheme: London Borough of Barnet (LBB) in the prior year. Participation ceased on 30 November 2022 and the amount due on exit from the scheme was settled in the current year. The following disclosures include settlement for LBB based on cessation calculations provided by the scheme actuary.

There are commercial charges over properties to secure the liabilities on SHGPP. The respective properties are valued at approximately £50 million.

We have been notified by the Trustee of the OPS that it has performed a review of the changes made to the Scheme’s benefits over the years and the result is that there is uncertainty surrounding some of these changes. The Trustee has been advised to seek clarification from the Court on these items. This process is ongoing and the matter is unlikely to be resolved before the end of 2024 at the earliest. It is recognised that this could potentially impact the value of the OPS liabilities, but until Court directions are received, it is not possible to calculate the impact of this issue with any accuracy at this time. No adjustment has been made in these financial statements in respect of this potential issue.

The following disclosures are the aggregate for OPS, HHGPS, SHGPP, KCC, ESCC, IOW and LBB. To the extent that the disclosure for any individual scheme show a surplus it has been treated as irrecoverable. As at the current year end the total irrecoverable surplus is attributable to the HHGPS, SHGPP, ESCC and IOW.

pensions payable in respect of members of
scheme.		 the
FUNDING POSITION AT 31 MARCH
2024
£m		 2023
£m
Share of assets
235.6
Estimated liabilities
(221.2)
Net surplus
14.4
Unrecognised surplus (asset
ceiling)
(27.0)		 244.4
(241.8)
2.6
(18.6)
Net defcit
(12.6)		 (16.0)
AMOUNTS CHARGED TO
OPERATING SURPLUS FOR
YEAR TO 31 MARCH
2024
£m		 2023
£m
Current service cost
0.8
Administration expenses
0.4
Settlement
4.4
Past service costs
0.2		 1.5
0.5
(0.2)
0.3
Total operating charge
5.8		 2.1

Southern Housing Annual Report 2023-24

Financial Statements

130

----- Start of picture text -----
AMOUNTS CHARGED TO
2024 2023
INTEREST AND FINANCING COST
£m £m
FOR YEAR TO 31 MARCH
Net interest (income)/cost on
(0.3) 0.5
assets and liabilities
Interest expense on
0.8 -
irrecoverable surplus
Total net interest cost 0.5 0.5
AMOUNT RECOGNISED IN
STATEMENT OF COMPREHENSIVE
INCOME FOR YEAR TO 31 MARCH
Actual return less expected
(7.9) (74.4)
return on assets
Experience losses (0.9) (16.2)
Change in financial and 12.7 105.4
demographic assumptions
Actuarial gain 3.9 14.8
Change in unrecognised
(7.6) (17.1)
surplus
Total actuarial loss (3.7) (2.3)
ANALYSIS OF MOVEMENT IN
SURPLUS IN YEAR TO 31 MARCH
Surplus /(deficit) at beginning 2.6 (22.8)
of the year
Total contributions 13.4 13.3
Current service cost (0.8) (1.5)
Past service costs (0.2) (0.4)
Settlement (4.4) 0.2
Other finance income / 0.3 (0.5)
(costs)
Administration expense (0.4) (0.5)
Actuarial gain 3.9 14.8
Surplus in the schemes at the
14.4 2.6
end of the year
Unrecognised Surplus (27.0) (18.6)
Net deficit (12.6) (16.0)
CHANGE IN UNRECOGNISED
SURPLUS IN YEAR TO 31 MARCH
Unrecognised surplus at
18.6 1.5
beginning of the year
Interest on unrecognised
0.8 -
surplus
Change in unrecognised
7.6 17.1
surplus (excluding interest)
Unrecognised surplus at end
27.0 18.6
of the year
----- End of picture text -----

----- Start of picture text -----
RECONCILIATION OF OPENING
AND CLOSING BALANCES OF
2024 2023
FAIR VALUE OF ASSETS AS AT 31
£m £m
MARCH
Opening fair value of assets 244.4 307.4
Expected return on assets 11.3 8.4
Actuarial losses (8.0) (73.7)
Other losses 0.1 (0.7)
Contributions by the
13.4 13.3
employer
Contributions by the
0.3 0.3
participants
Administration expense (0.4) (0.4)
Settlement (15.4) (0.6)
Net benefits paid out (10.1) (9.6)
Closing fair value of assets 235.6 244.4
----- End of picture text -----

ontributions by te
participants
0.3
Administration expense
(0.4)
Settlement
(15.4)
Net beneftspaid out
(10.1)
Closingfair value of assets
235.6		 0.3
(0.4)
(0.6)
(9.6)
244.4
RECONCILIATION OF OPENING AND
CLOSING BALANCES OF THE PRESENT
VALUE OF SCHEME LIABILITIES AS AT
31 MARCH
Opening present value of
liabilities
241.8
Service costs
0.8
Change in assumptions
(12.7)
Interest costs
11.0
Contributions by participants
0.3
Actuarial gains on liabilities
0.9
Net benefts paid out
(10.1)
Settlement
(11.0)
Past service costs
0.2
Closing present value of
liabilities
221.2		 330.3
1.5
(105.3)
8.9
0.3
16.2
(9.6)
(0.8)
0.3
241.8

Southern Housing Annual Report 2023-24

Financial Statements 131

Split of plan assets

The major categories of plan assets as a percentage of total plan assets were as follows:

total plan assets were as follows:
NON LOCAL GOVERNMENT
PENSION SCHEMES
2024
£m		 2023
£m
Equities
0% - 8%
Bonds
50% - 97%
Property
0% - 4%
Absolute return funds
0% - 0%
Cash
1% - 8%
Other
0% - 29%
LOCAL GOVERNMENT
PENSION SCHEMES		 0% - 1%
55% - 95%
0% - 7%
0% - 2%
3% - 4%
0% - 34%
Equities
69% - 69%
Bonds
15% - 15%
Property
15% - 15%
Absolute return funds
0% - 0%
Cash
1% - 12%
Other
0% - 0%		 64% - 71%
12% - 14%
10% - 16%
0% - 7%
1% - 2%
0% - 3%

Mortality

Life expectancy is based on the mortality assumptions for the underlying scheme funding valuations.

Based on these assumptions, the average future life expectancies from retirement age are summarised below:

below:
2024 2023
Current male
pensioners
20.5 - 22.1 years
Current female
pensioners
23.0 - 24.4 years
Future male
pensioners
21.7 - 23.2 years
Future female
pensioners
24.4 - 25.4 years		 20.9 - 22.3 years
23.4 - 24.6 years
22.1 - 23.4 years
24.8 - 25.6 years

Financial assumptions

The main financial assumptions at 31 March each year were as follows:


were as follows:
2024 2023
Rate of general long term
increase in salaries
2.8% - 2.9%
Rate of increase in
pension payment
2.0% - 3.0%
Discount rate
4.7% - 4.8%
Infation assumption (CPI)
2.8% - 2.9%		 3.0% - 4.1%
2.0% - 3.1%
4.6% - 4.7%
3.0% - 3.1%

Southern Housing Annual Report 2023-24

Financial Statements 132

Southern Housing Board Members, Executive Officers and Advisors

Board

Sir Peter Dixon Chair

Janet Collier Vice Chair Chair of People Committee

Daisy Armstrong Resident Board member

Damien Régent Chair of Audit & Risk Committee

Eugenie Turton CB Chair of Residents’ Services Committee

Geanna Bray

Vice-Chair of Residents’ Services Committee

(William) Howard Cresswell

Chair of Integration & Transformation Committee Chair of Pensions Group

Ian Wilson

Resident Board member

Michelle Dovey Chair of Treasury Committee

Paul Hackett CBE Chief Executive

Phil Blume Resident Board member

Robert Clark Chair of Developments and Assets Committee

Carol Rosati Resigned 31 December 2023

Grace Alaneme Resigned 6 December 2023

Executive Team

Paul Hackett CBE Group Chief Executive

Sarah Smith Chief Financial Officer

Jane Porter Chief Operating Officer

Jenny Poore

Executive Director People & Culture

Yvette Carter

Executive Director Contract Services

Tom Paul

Executive Director Strategy & Change

Karin Stockerl

Executive Director of Assets and Sustainability

Richard White Executive Director Development

Secretary and registered office

Puneet Rajput Fleet House Farringdon London EC1M 5LA

Registered society number: 8983

Regulator of Social Housing number: 5171

Advisors to the Southern Housing Board

Principal Solicitors

Trowers & Hamlins 3 Bunhill Row London EC1Y 8YZ

Devonshires 30 Finsbury Circus London EC2M 7DT

Statutory Auditors

BDO LLP 2 City Place Beehive Ring Road Gatwick RH6 0P

Principal Bankers

Barclays Bank Plc 1 Churchill Place Canary Wharf London E14 5HP

National Westminster Bank Plc 2 Staceys Street Maidstone Kent ME14 1ST

SOUTHERN HOUSING