Group Accounts 2005

i

GROUP ACCOUNTS

ii

East Thames Group Limited Board Members, Senior Staff, Auditors and Solicitors

Registered Charity 1084952Registered under the Companies Act 1985 4091100Registered by The Housing Corporation No. LH 4309

BoardChairman: Mr R Henchley (to Sept 2004)

Mr R Chilton (from Sept 2004)

Vice Chair: Mr J Mallender

Treasurer: Mr C Villiers

Other Members: Mr O Olanrewaju

Mr B Robertson

Mr J Norman

Mr G McLeary

Mr C Dankwa

Ms C Thomas (to Mar 2005)

Mr D Edwards

Mr D Goodman

Mr A Bridgwater

Senior StaffGroup Chief Executive: Ms J Barnes

Deputy Chief Executive: Mr M Heys

Assistant Chief Executive: (Regeneration and New Business) Mr F Vickery (to Jan 2005)

Group Director of Development: Mr S Tarry

Group Director of Technical Services: Mr K Carter (to Nov 2004)

Group Director of Corporate Services: Ms D Boakye

Director of Information Technology: Ms J Kutner

Group Company Secretary: Mr H Potter

Solicitors DevonshiresSalisbury HouseLondon WallLondon EC2M 5QY

Trowers and HamlinsSceptre Court40 Tower HillLondon EC3N 4DX

Auditors KPMG LLP1 Forest GateBrighton RoadCrawleyWest Sussex RH11 9PT

Bankers Barclays Bank plcBusiness BankingPO Box 5441st Floor54 Lombard StreetLondon EC3V 9EX

Registered Office 3 Tramway AvenueStratfordLondon E15 4PN

CONTENTS01 Report of the Board 04 Report of the auditors 05 Consolidated balance sheet 06 Consolidated income and

expenditure account07 Consolidated cash flow statement 08 Parent balance sheet 09 Parent income and expenditure

account10 Parent cash flow statement 11 Notes to the financial statements

EAST THAMES GROUP LIMITED

FinancialStatements31 March 2005


Report of the Board

The Board presents its report and audited financial statements for the year ended 31 March 2005.

Legal statusThe Group is a charity, registered under the Companies Act 1985 and is a Registered Social Landlord under the Housing Act 1996. On 1 April 2001 it assumed responsibility as the parent company for four operating subsidiaries, East Homes Limited (formerly East Thames Housing Association Limited), East Living Limited (formerly East Thames Care Limited), East Choice Limited (formerly Boleyn & Forest Housing Society Limited), and East Potential (formerly Network East Foyers). On 31 December 2001, it assumed responsibility as the parent company for East Street Services Limited, a company established to undertake the Group’s non-charitable activities.

Principal activitiesThe parent company’s principal activities are the provision of central services to its operating subsidiaries. The four operational subsidiaries are East Homes Limited which provides social housing, East Choice Limited which provides low cost home ownership, East Living Limited which provides care and supported housing, and East Potential which manages foyers on behalf of the Group.

Review of the yearThe year again saw significant growth. During the year the Group has added 111 units of accommodation taking its portfolio of propertiesto 11,301 units.

During the year, the Group spent £59.7 million acquiring and developing its housing stock and an additional £5.2 million (including improvements on housing for rent, aids and adaptations and estate improvements) on its continuing substantial programme of rehabilitating, modernising and repairing its housing stock. It is the intention to fully upgrade each property at least every 25 years.

Performance for the yearThe Group achieved a surplus for the year of £4.7 million (2004: £8.1 million). Revenue reserves have increased to £50 million (2004: £45.5 million) and restricted, designated reserves and consolidated reserves total £5.5 million (2004: 5.1 million).

Disabled employeesApplications for employment from disabled persons are given full and fair consideration for all vacancies, having regard to their particular aptitude and abilities. In the event of employees becoming disabled, every effort is made to retain them in order that their employment within the organisation may continue. It is the policy of the Group that training, career development and promotion opportunities should be available to all employees.

Health and SafetyThe Group takes its responsibilities for Health and Safety very seriously and has established a training and implementation programme, led by a health and safety committee dedicated to this topic.

Employee involvementThe Group has continued its practice of consulting and keeping employees informed on matters affecting them and on the progress of the Group. This is carried out in a number of ways including a formal forum for consultation, departmental meetings and a variety of newsletters.

01


Report of the Board (continued)

DonationsThe Group made charitable donations during the year amounting to some £12,737. No donations were given to charities of which Board members are Trustees.

Internal ControlsThe Board has overall responsibility for establishing and maintaining the whole system of internal control and for reviewing its effectiveness. This applies to all companies within the East Thames Group.

The Board recognises that no system of internal control can provide absolute assurance or eliminate all risk. The system of internal control is designed to manage risk and to provide reasonable assurance that key business objectives and expected outcomes will be achieved. It also exists to give reasonable assurance about the preparation and reliability of financial and operational information and the safeguarding of the Group’s assets and interests.

In meeting its responsibilities, the Board has adopted a risk-based approach to internal controls which are embedded within the normal management and governance process. This approach includes the regular evaluation of the nature and extent of risks to which the Group is exposed and is consistent with Turnbull principles as incorporated in the Housing Corporation’s circular R2-25/01: Internal Controls Assurance.

The process adopted by the Board in reviewing the effectiveness of the system of internal control, together with some of the key elements of the control framework includes:

Identification and evaluation of key risksManagement responsibility has been clearly defined for the identification, evaluation and control of significant risks. There is a formal and on-going process of management review in each area of the Group’s activities. This process is co-ordinated through a regular reporting framework by the Group Risk Management and Audit Committee. The Group Executive and Officer Risk Management Panel regularly consider reports on significant risks facing the Group. The Group Chief Executive/relevant Managing Director is responsible for reporting to the respective Board(s) any significant changes affecting key risks.

Monitoring and corrective actionA process of control self-assessment and regular management reporting on control issues provides hierarchical assurance to successive levels of management and to the Board. This process continues to be developed to ensure a rigorous approach and includes action for ensuring that corrective action is taken in relation to any significant control issues.

Control environment and control proceduresThe Board retains responsibility for a defined range of issues covering strategic, operational, financial and compliance issues including treasury strategy and new investment projects. The Board has adopted the National Housing Federation Code of Governance – Competence and Accountability. This is used as a basis for the Group’s policies with regard to quality, integrity and ethics. It is supported by a framework of policies and procedures, with which employees must comply. These cover issues such as delegated authority, segregation of duties, accounting, treasury management, health and safety, data and asset protection and fraud prevention and detection.

02

Internal Controls (continued)Information and financial reporting systemsFinancial reporting procedures include detailed budgets for the year ahead and forecasts for subsequent years. These are reviewed and approved by the Board. The Board also regularly review key performance indicators to assess progress towards the achievement of key business objectives, targets and outcomes.

The internal control framework and the risk management process are subject to regular review by Internal Audit who are responsible for providing independent assurance to the Board via its Group Audit and Risk Management Committee. The committee considers internal control and risk regularly during the year.

The Board has received the Group Chief Executive’s annual report, has conducted its annual review of the effectiveness of the system of internal control and has taken account of any changes needed to maintain the effectiveness of the risk management control process.

The Board confirms that there is an on-going process for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year under review, up to the date of the annual report, and is regularly reviewed by the Board.

In addition to the above the Group has implemented a number of changes to its approach and day to day management of risk and audit matters, applying current best practice to both areas of its work.

Statement of responsibilities of the BoardThe Companies Act 1985 and the Housing Act 1996 require the Board to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the surplus of the Group for that period. In preparing those financial statements the Board has:

• selected suitable policies and applied them consistently;

• made judgements and estimates that are reasonable and prudent;

• followed applicable accounting standards, subject to any material departures disclosed and explained in the financial statements; and

• prepared the financial statements on a going concern basis

The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and ensure that the financial statements comply with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2000. It is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

AuditorsThe Group is in the process of carrying out a periodic audit tender and will propose a resolution at the forthcoming Annual General Meeting for the appointment of the successful firm as auditors.

H.A. POTTERGroup Company Secretary


Report of the Board (continued)

03


Report of the independent auditors, KPMG LLP, to the members of East Thames Group LimitedWe have audited the financial statements on pages 5 to 31.

This report is made solely to the Company’s members as a body, in accordance with Schedule 1 paragraph 16 and 18 to the Housing Act 1996 and the Companies Act 1985 respectively. Our audit work has been undertaken so that we might state to the Company’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 Company and Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Board and AuditorsThe Company’s Board is responsible for preparing the Board’s report and, as described on page 3, the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Housing Corporation and by our profession’s ethical guidance.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2000. We also report to you, if in our opinion, a satisfactory system of control over transactions has not been maintained, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding the directors’ remuneration and transactions with the Company are not disclosed.

We read the other information accompanying the financial statements and consider whether it is consistent with those statements. We consider

the implications for our report if we become aware of any apparent misstatement or material inconsistencies with the financial statements.

Basis of audit opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Board in the preparation of the financial statements and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 March 2005 and of their surplus for the year then ended and have been properly prepared in accordance with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2000.

KPMG LLP

Chartered AccountantsRegistered Auditor1 Forest GateBrighton RoadCrawley, West Sussex RH11 9PT

04


Consolidated balance sheet at 31 March 2005

Note 2005£’000

2004£’000

Tangible fixed assets

Housing properties at valuation 10 445,943 403,639

Other fixed assets 11 11,709 8,515

457,652 412,154

Investments

Cost of Homebuy 10 38,766 37,209

Less Social Housing Grant (38,766) (37,209)

– –

Current assets

Investments 12 1,724 4,508

Stock 13 11,409 7,418

Debtors 14 7,805 9,088

Cash at bank and in hand 15 4,398 2,274

25,336 23,290

Creditors: amounts falling due within one year 16 (40,245) (27,785)

Net current liabilities (14,909) (4,495)

Total assets less current liabilities 442,743 407,659

Creditors: amounts falling dueafter more than one year 17 177,595 164,779

Provision for liabilities and charges 20 100 100

Capital and reserves

Share capital 21 - -

Revenue reserve 22 50,169 45,516

Designated reserve 22 3,491 1,953

Restricted reserve 22 1,791 2,912

Consolidation reserve 22 263 263

Revaluation reserve 22 209,334 192,136

265,048 242,780

442,743 407,659

05

The financial statements were approved by the Board on 22 August 2005 and signed on its behalf by:

ROBERT CHILTON CHARLES VILLIERS HENRY POTTERChairman Treasurer Group Company Secretary


Consolidated income and expenditure accountfor the year ended 31 March 2005

Note2005

£’0002004

£’000

Turnover 2 72,584 66,700

Operating costs 2 (63,021) (56,145)

Operating surplus 9,563 10,555

Surplus on property disposals 4 4,585 6,410

Net interest payable and similar charges 7 (9,450) (8,837)

Surplus for the year 22 4,698 8,128

Transfer from revaluation reserve 22 372 25

Transfer (to)/from designated reserves 22 (1,538) 116

Transfer (to)/from restricted reserves 22 1,121 325

Unallocated surplus 4,653 8,594

Revenue reserves brought forward 45,516 36,922

Revenue reserves carried forward 50,169 45,516

Consolidated Statement of total recognised surplusesand deficits for the year ended 31 March 2005

2005£’000

2004£’000

Surplus for the year 4,698 8,128

Unrealised surplus on revaluation of housing properties 10 17,570 55,932

Prior year adjustment - Revaluation – 43,552

Total recognised surpluses for the year 22,268 107,612

Note of historical cost surpluses and deficitsfor the year ended 31 March 2005

2005£’000

2004£’000

Surplus on ordinary activities before taxation 4,698 8,128

Excess of actual depreciation over historical cost depreciation 255 –

Realisation of property revaluation surpluses of previous years 117 25

Historical cost surplus on ordinary activities before taxation 5,070 8,153

Historical cost surplus for the year after taxation and gift aid 5,070 8,153

All turnover and operating surpluses are attributable to continuing operations.

06



Note2005

£’0002004

£’000

Net cash flow from operating activities 24 4,972 27,028

Returns on investments and servicing of finance

Interest received 169 538

Interest paid (10,153) (9,071)

Net cash outflow on servicing of finance (9,984) (8,533)

Capital expenditure and financial investments

Purchase and construction of housing properties (56,865) (45,263)

Purchase of other fixed assets (4,206) (3,824)

Purchase of investments (2,315) (26,819)

Social Housing Grant received 12,769 40,730

Other capital grants repaid (1,679) (224)

Proceeds of first tranche sales 18,187 7,300

Proceeds from Homebuy 1,072 990

Sales of housing properties 8,629 11,429

Sales of other fixed assets 35 19

Sales of investments 2,784 8,713

Cash outflow from investing activities (21,589) (6,949)

Cash (outflow)/inflow before financing (26,601) 11,546

Financing

Housing loans received 31,489 6,379

Housing loans repaid (5,906) (18,387)

Cash inflow/(outflow) from financing 25 25,583 (12,008)

Corporation Tax – (150)

Gift Aid – (116)

Decrease in cash in the period 25 (1,018) (728)


Consolidated cash flow statement for the year ended 31 March 2005

07

Note2005

£’0002004

£’000

Tangible fixed assets 11 3,676 741

Current assets

Debtors 14 7,420 1,026

Cash at bank and in hand 15 - 982

7,420 2,008

Creditors: amounts falling due within one year 16 (8,152) (367)

(732) 1,641

Total assets less current liabilities 2,944 2,382

Capital and reserves

Reserves 22 713 680

Restricted reserves 22 1,750 -

Designated reserves 22 481 1,702

2,944 2,382


Parent balance sheet at 31 March 2005

08



Note2005

£’0002004

£’000

Turnover 2 12,427 9,239

Operating costs 2 (11,865) (8,389)

Operating surplus 562 850

Net interest receivable 7 - 69

Surplus on ordinary activities 562 919

Transfer from designated reserves 22 (529) -

Unallocated surplus 33 919

Revenue reserves brought forward 680 (239)

Revenue reserves carried forward 713 680


Parent income and expenditure accountfor the year ended 31 March 2005

09



Note 2005£’000

2004£’000

Net cash (outflow)/inflow from operating activities 24 (356) 1,688

Returns on investments and servicing of finance

Interest received - 69

Net cash inflow on investments and servicing of finance - 69

Cash (outflow)/inflow before financing (356) 1,757

Purchase of fixed assets (3,397) (741)

Gift aid (371) (34)

(Decrease)/Increase in cash in the period 25 (4,124) 982

Parent cash flow statementfor the year ended 31 March 2005


10

East Thames Group LimitedNotes to the financial statements31 March 2005

1. Accounting policies

(a) Basis of accountingThe financial statements of the parent company and the Group are prepared under the historical convention (as amended by the revaluation of the Group’s housing assets) in accordance with the Companies Act 1985, the Housing Act 1996 and comply with Accounting Requirements for Registered Social Landlords General Determination 2000. Applicable accounting standards and statements of recommended practice have been followed.

Basis of consolidationThe Group financial statements consolidate the financial statements of East Thames Group Limited and its operating subsidiaries East Homes Limited, East Choice Limited, East Street Services Limited, East Living Limited and East Potential.

(b) TurnoverTurnover represents rental and service charge income from tenants, management fees, sales of properties developed for other Registered Social Landlords and certain revenue grants.

(c) Housing propertiesHousing properties represent the Group’s investment in properties for rent and properties subject to shared ownership leases.

Completed housing properties held for letting are stated at Existing Use Value for Social Housing (EUV-SH). Shared ownership properties are stated at EUV-SH less the Net Present Liability to repay Social Housing Grant. Housing properties under construction are stated at cost less related SHG and other capital grants.

Cost comprises the cost of acquiring land and buildings, development costs, rehabilitation costs, attributable interest charges incurred during the development period and the capital element of expenditure incurred in respect of the major repair programmes of stock modernisation and estate improvement.

Development and modernisation costs include the capitalisation of the Group’s own directly related employee costs from the direct labour force involved in the development process and directly attributable development management costs and other direct costs. The cost of shared ownership properties is stated net of proceeds of first tranche sales. Land donated by public authorities is brought into cost at market value at the time of donation.

(d) Depreciation of housing propertiesFreehold land is not depreciated. Depreciation is charged so as to write down the value of freehold housing properties other than freehold land to their estimated residual value on a straight line basis over their remaining expected useful economic lives as follows:

Houses 100 to 150 years

Low level flats 100 to 150 years

Blocks over four floors 60 years

These useful economic lives apply equally to the Group’s rented, shared ownership and care stock of housing properties.

(e) Social Housing Grant (SHG)SHG is payable by the Housing Corporation and is utilised to reduce the capital costs of a scheme to a value which may be supported by rental income. Where SHG is received in advance of aggregate expenditure it is disclosed as a short-term creditor.

When the SHG is retained following the disposal of property, it is shown under the disposal proceeds or recycled capital grant funds in creditors. SHG is repayable in certain circumstances. When SHG becomes repayable it is included as a current liability until it is repaid. The repayment of SHG is generally subordinated to the repayment of housing loans, as agreed with the Housing Corporation.

11

( f ) Other grantsOther grants include grants from local authorities and other organisations, primarily the London Docklands Development Corporation. Capital grants are treated in the same way as SHG and include amounts attributable to land donated by public authorities. Grants in respect of revenue expenditure are included in the income and expenditure account in the same period as the expenditure to which they relate.

(g) StockStock is valued at the lower of cost and net realisable value.

(h) Other tangible fixed assetsService charge assets and other fixed assets, such as office buildings, are stated at cost less depreciation. Depreciation is provided evenly on the cost of service charge assets and other tangible fixed assets to write them down to their estimated residual values over their expected useful lives on a straight line basis at the following rates:

Freehold offices 4.0%

Lifts 4.0%

Office furniture and improvements 14.3%

Service equipment 20.0%

Motor vehicles 25.0%

Computer equipment 33.3%

Major software 10.0%

( i ) PensionsThe Group participates in the Social Housing Pension Scheme final salary pension scheme and retirement benefits to Group employees are funded by contributions from all participating employers and employees in the scheme. Payments are made to a fund operated by the Pensions Trust, an independent trust providing superannuation benefits for employees of voluntary organisations. These payments are made in accordance with periodic calculations by consulting actuaries and are based on pension costs applicable across the various participating associations taken as a whole.

( j ) Agency managed hostelsThe Group has brought into its financial statements only income and expenditure under its direct control in respect of agency managed hostels.

(k) TaxationEast Thames Group Limited is a registered charity and is registered under the 1985 Companies Act and is not generally subject to corporation tax.

( l ) HomebuyA subsidiary of the group, East Choice Limited participates in the Homebuy scheme. Purchasers are given a grant of 25% of the value of their home by the company which is in turn reimbursed by the Housing Corporation by way of SHG. No rent is payable to the company. The company receives an allowance for handling the transaction, paid by way of further grant.


1. Accounting policies (continued)

12


2. Particulars of turnover, cost of sales, operating costs and operating surplus

GROUPTurnover

£’000

Operating costs

£’000

2005Operating

surplus/(deficit)

£’000

2004Operating

surplus/(deficit)

£’000

Income and expenditure from lettings

Housing accommodation 34,867 18,317 16,550 12,376

Special needs accommodation 14,875 12,233 2,642 2,619

Temporary social housing 16,709 15,671 1,038 949

Shared ownership accommodation 4,620 2,460 2,160 1,521

71,071 48,681 22,390 17,465

Other income and expenditure

Regeneration and development services 377 414 (37) (505)

Grants received 123 - 123 -

Other 1,013 13,926 (12,913) (6,405)

1,513 14,340 (12,827) (6,910)

Total 72,584 63,021 9,563 10,555

PARENT

Other income and expenditure

Regeneration and development services 377 413 (36) (505)

Grant from subsidiary 123 - 123 -

Group recharge 9,644 11,407 (1,763) 1,074

Other 2,283 45 2,238 281

Total 12,427 11,865 562 850

13


3. Particulars of income and expenditure from lettings

Care and SupportedHousing

HousingAccommodation

SupportedHousing

ResidentialCare Homes

TemporarySocial

HousingShared

Ownership2005

£’0002004

£’000

Income from lettings

Rent receivable net of identifiable service charges 28,232 1,935 334 16,027 2,978 49,506 45,528

Service charges receivable 1,485 4,138 - - 626 6,249 6,971

Gross rents receivable 29,717 6,073 334 16,027 3,604 55,755 52,499

Less: Rent losses from voids (567) (288) (25) (715) - (1,595) (1,320)

Net rents receivable 29,150 5,785 309 15,312 3,604 54,160 51,179

Revenue grants from local authorities and other agencies 4,193 1,439 4,927 - - 10,559 8,081

Support Charges - Fixed contract - 1,563 162 - - 1,725 1,185

Other grants 911 - - - - 911 -

Other income 613 690 - 1,397 1,016 3,716 3,313

Total income from lettings 34,867 9,477 5,398 16,709 4,620 71,071 63,758

Expenditure on letting activities

Services 1,465 793 360 - 291 2,909 3,083

Management 6,726 4,471 4,155 14,619 454 30,425 28,146

Overhead Allocation - 726 1,038 - - 1,764 1,794

Routine maintenance 4,983 549 90 792 578 6,992 6,492

Planned maintenance 2,719 - - - - 2,719 2,393

Rent losses from bad debts 317 (51) (2) 260 - 524 641

Revenue element of major repairs expenditure 1,107 - - - - 1,107 1,078

Housing propertiesdepreciation 1,000 - - - - 1,000 523

Other costs - - 104 - 1,137 1,241 2,143

Total expenditure on lettings 18,317 6,488 5,745 15,671 2,460 48,681 46,293

Operating Surplus on letting activities 16,550 2,989 (347) 1,038 2,160 22,390 17,465

14


4. Surplus on property sales

GROUP SalesProceeds

£’000

Costof Sales

£’000

2005Surplus£’000

2004Surplus£’000

Sales of older properties 8,629 4,358 4,271 6,157

Homebuy 1,072 758 314 253

Sales of properties developed for sale 24,341 24,341 - -

34,042 29,457 4,585 6,410

5. Units of accommodation in management

GROUPSelf-contained rental stock Hostels and

Shared HousingManaged for others

Total

Managedby EastThames

Managedby others

SupportedHousing

Stock

Managedby EastThames

Managedby others

Self-contained

units

Hostels/Shared

HousingBedspaces

TemporarySocial

HousingShared

Ownership

1 April 2004 11,190 6,820 432 227 489 119 95 90 1,497 1,421

31 March 2005 11,301 7,114 392 159 180 265 291 21 1,376 1,503

15


6. Operating surplus

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

This is arrived at after charging:

Depreciation of housing properties 1,000 523 - -

Depreciation of other fixed assets 946 657 462 -

Profit or Loss on sale of other fixed assets 31 - - -

Operating leases land and buildings 13,582 12,258 - -

Auditors’ remuneration:

- for audit services 63 59 9 12

- for non-audit services 20 8 - -

7. Net interest payable and similar charges

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Interest receivable 169 202 - 69

Interest payable on loans and leases:

- repayable wholly within five years - - - -

- repayable in more than five years (10,615) (9,091) - -

(10,446) (8,889) - 69

Interest payable capitalised on housing properties under construction 1,548 151 - -

Interest receivable transferred to the capital grant recycling fund (552) (99) - -

(9,450) (8,837) - 69

16


8. Employees

Group2005

No.

Group2004

No.

Parent2005

No.

Parent2004

No.

Average number of employees:

Administration 446 415 154 128

Care Staff 317 275 - -

Wardens, caretakers, cleaners 6 7 - -

Direct labour 52 49 - -

823 746 154 128

Number of employees expressed in full time equivalents:

Administration 446 404 151 124

Care Staff 313 263 - -

Wardens, caretakers, cleaners 3 6 - -

Direct labour 52 49 - -

873 722 151 124

Staff costs:

Wages and salaries 21,491 16,758 5,269 3,536

Social Security costs 1,899 1,510 496 336

Other pension costs 993 819 374 264

24,383 19,087 6,139 4,136

17


8. Employees (continued)

The Group participates in the Social Housing Pension Scheme (SHPS). SHPS is multi-employer defined benefit scheme. The Scheme is funded and is contracted out of the state scheme.

The last formal valuation of the Scheme was performed at 30 September 2002 by a professionally qualified actuary using the “projected unit credit” method. The market value of the Scheme’s assets at the last valuation date was £650 million.

The Group paid contributions at the rate of 11.7% during the accounting period. Member contributions vary between 3.1% and 6.1% depending on their age at the date of joining the Scheme.

It is not possible to identify the share of underlying assets and liabilities belonging to individual participating employers.

Due to the nature of the scheme, the income and expenditure account charge for the period under both SSAP 21 and FRS 17 represents the employer contribution payable.

Financial assumptionsThe financial assumptions underlying the valuation were as follows:

% per annum Rate of return on

future contributions 6.6

Rate of return on accumulated assets 7.2

Rate of salary increases 4.5

Rate of pension increases 2.5

Rate of price inflation 2.5

The accumulated assets of the Scheme were assumed to earn the same return as if they had been invested in a portfolio comprising 100% UK equities for non-pensioner liabilities and 25% UK equities/75% gilts for pensioner liabilities.

The valuation revealed a shortfall of assets compared with the value of liabilities of some £117 million (equivalent to a past service funding level of 85%). The long term joint contribution rate required from employers and members to meet the cost of future benefit accrual was assessed as 15% of pensionable salaries.

Following consideration of the results of actuarial valuation, with effect from 1 April 2004 most employers (including East Thames Group) are required to contribute at the standard rate of 11.7% of pensionable salaries. Member contributions will also be increased by 1.1% from 2.0%-5.0% to 3.1-6.1% of pensionable salaries depending on age. Employers that participate in the Scheme on a non-contributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). This rate will increase from 15.0% to 17.3% of pensionable salaries with effect from 1 April 2004. Employers that have closed the Scheme to new members are required to pay an additional employer contribution loading of 3% to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to the standard 11.7% to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into the SHPS Scheme.

If the valuation assumptions are borne out in practice this pattern of contributions should be sufficient to eliminate the past service deficit by 31 March 2017.

The next valuation is due at 30 September 2005.

18


9. Directors, members and senior staff emoluments

BasicSalary

£

BenefitsIn Kind

£

PensionContributions

£

Parent Total

2005£

ParentTotal

2004£

The aggregate amount of emoluments paid to the directors was 611,684 1,196 51,405 664,285 519,116

Emoluments of the Chief Executive, who was also the highest paid director, excluding pension contributions. 116,614 1,196 - 117,810 103,081

The Directors of the parent company as defined under the Accounting Requirements for Registered Social Landlords General Determination 2000 are

its Management Board, the Chief Executive and any other person who is a member of the senior management team.

The Chief Executive is an ordinary member of the pension scheme and has no enhanced or special terms and does not have an individual pension arrangement to which East Thames Group or any of its subsidiaries makes a contribution.

Expenses paid during the year to members of the Board amount to £38,804 (2004: £24,786). No payments of benefits other than those permitted, were made to the persons referred to in Part 1, Schedule 1 of the Housing Act 1996.

19


10. Tangible fixed assets - Housing properties

Housingproperties

held forletting£’000

Housingproperties

underconstruction

£’000

Shared ownership properties

held for letting

£’000

Shared ownership properties

under construction

£’000 Total

£’000

Valuation

As at 1 April 2004 320,064 26,603 58,958 37,763 443,388

Additions 3,922 20,731 1,347 33,983 59,983

Interest capitalised 109 328 40 1,071 1,548

Schemes completed 12,514 (12,514) 23,819 (23,819) -

Disposals (818) - (20,249) - (21,067)

Valuation adjustment (3,732) - 8,110 - 4,378

At 31 March 2005 332,059 35,148 72,025 48,998 488,230

Depreciation and impairment

As at 1 April 2004 - - - - -

Depreciation charged in year 1,000 - - - 1,000

Impairment charged in year - - - - -

Depreciation released on disposals - - - - -

Valuation adjustment (1,000) - - - (1,000)

At 31 March 2005 - - - - -

Social Housing and other grants

As at 1 April 2004 - 24,713 - 15,036 39,749

Additions 2,172 11,374 529 2,096 16,171

Schemes completed 6,064 (6,064) 4,868 (4,868) -

Disposals (526) - (915) - (1,441)

Valuation adjustment (7,710) - (4,482) - (12,192)

At 31 March 2005 - 30,023 - 12,264 42,287

Net book value

At 31 March 2005 332,059 5,125 72,025 36,734 445,943

At 31 March 2004 320,064 1,890 58,958 22,727 403,639

20


10. Tangible fixed assets - Housing properties (continued)

2005£’000

2004£’000

Total accumulated capital and revenue social grant receivable

Capital grants 387,493 372,977

Revenue grants - -

387,493 372,977

Housing properties comprise:

Freehold land and buildings 445,868 403,176

Long leasehold land and buildings 355 463

446,223 403,639

Completed housing properties held for letting are stated at Existing Use Value for Social Housing (EUV-SH) and shared ownership properties are stated at EUV-SH less the Net Present Liability to repay Social Housing Grant. Housing properties have been valued by professional valuers, FPD Savills, Chartered Surveyors.

The desktop valuation of completed housing properties was prepared as at 31 March 2005 in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. This has resulted in a positive valuation adjustment as follows:

£’000

Completed properties at valuation

East Homes Limited 332,059

East Choice Limited 72,045

404,104

Housing properties under construction at cost

East Homes Limited 35,148

East Choice Limited 48,998

84,146

21

In the valuing of housing properties, discounted cash flow methodology was adopted and key assumptions included:

Discount rate 6.0%

Annual inflation rate 2.5%

Level of annual rent increase 0.5%

The carrying value of the housing properties that would have been in the financial statements had the assets been carried forward at historical costs less SHG and depreciation is as follows:


10. Tangible fixed assets - Housing properties (continued)

2005£’000

2004£’000

Historical cost 680,245 639,664

Social Housing Grant (389,386) (372,977)

Other capital grants (49,888) (51,567)

Depreciation and impairment (4,362) (3,617)

236,609 211,503

Investment in Homebuy:

Long term investment in properties (Homebuy) 39,498 37,931

Less grants received (39,498) (37,931)

Grants recycled 732 722

Decrease in investment in properties (732) (722)

- -

22


11. Tangible fixed assets - Other

Freehold Office£’000

Plant,equipment

and furniture

£’000

Motorvehicles

£’000Total

£’000

GROUP

Cost

At 1 April 2004 9,475 5,550 275 15,300

Additions 703 3,472 31 4,206

Disposals (76) (323) (174) (573)

At 31 March 2005 10,102 8,699 132 18,933

Depreciation

At 1 April 2004 (2,722) (3,837) (226) (6,785)

Charged in year (352) (563) (31) (946)

Disposals 72 295 140 507

At 31 March 2005 (3,002) (4,105) (117) (7,224)

Net book value

At 31 March 2005 7,100 4,594 15 11,709

At 31 March 2004 6,753 1,713 49 8,515

PARENT

Cost

At 1 April 2004 - 741 - 741

Additions 1,319 2,078 - 3,397

Disposals - - - -

At 31 March 2005 1,319 2,819 - 4,138

Depreciation

At 1 April 2004 - - - -

Charged in year - (462) - (462)

Disposals - - - -

At 31 March 2005 - (462) - (462)

Net book value

At 31 March 2005 1,319 2,357 - 3,676

At 31 March 2004 - 741 - 741

23

12. Investments

East Homes Limited, formerly known as East Thames Housing Association Limited, together with three other registered social landlords and the London Borough of Newham has invested in Passmore Urban Renewal Limited. This Industrial and Provident Society has been set up for the promotion of urban regeneration in the London Borough of Newham. At 31 March 2002, East Homes Limited had invested £450,000 in this project.

The parent company owns one £1 nominal share in East Choice Limited, formerly known as Boleyn and Forest Housing Society Limited, whose main activity is developing and managing shared ownership schemes. The parent company has entered into trust arrangements with the members of East Choice Limited which require it to classify it as a subsidiary. East Choice Limited is a Registered Social Landlord with charitable status, registered with the Housing Corporation.

The parent company has a 100% shareholding in East Street Limited, formerly known as Boleyn and Forest Commercial Services Limited, whose main activity is to undertake property management services for other associations and to deal with other non-charitable housing activities.

The parent company owns one £1 nominal share in East Living Limited, formerly known as East Thames Care Limited whose main activity is providing care and housing management for supported housing and residential care homes. The parent company has entered into trust arrangements with the members of East Living Limited which require it to classify it as a subsidiary.

The parent company has entered into trust arrangements with the members of East Potential, formerly known as Network East Foyers which require it to classify it as a subsidiary. The principal activity of East Potential is the provision of housing management services at Stratford (Focus E15), Harlow, Redbridge and Tower Hamlets (Drapers City) foyers, First Step Assessment Centre and related training and information services to young people in east London and Harlow.


2005£’000

2004£’000

Passmore Urban Renewal Limited 450 450

Fixed term Treasury Deposit 1,274 4,058

Total 1,724 4,508

24

13. Stock and work in progress


Group2005

£’000

Group2004

£’000

Completed properties for sale to other Registered Social Landlords 8,385 7,968

Properties for sale to other Registered Social Landlords under construction – net of SHG 3,024 (550)

11,409 7,418

14. Debtors

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Due within one year:

Arrears of rent and service charges 3,672 3,981 - -

Less: Provision for bad and doubtful debts (1,827) (2,291) - -

1,845 1,690 - -

Other debtors 4,495 5,200 497 160

Prepayments and accrued income 1,465 2,198 184 -

Amounts due from group companies (net of provisions ) - - 6,739 866

7,805 9,088 7,420 1,026

15. Cash at bank and in hand

Included in cash at bank and in hand are amounts totalling:

2005 - Group: £200,000 (Parent Company: £Nil)

2004 - Group: £200,000 (Parent Company: £Nil)

which are subject to restrictions and are not freely available for general use.

25

16. Creditors: Amounts falling due within one year

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Loans (note 18) 13,546 1,590 - -

Bank overdraft 3,142 - 3,142 -

Rent and service charges received in advance 1,272 1,121 - -

Corporation Tax - - - -

Other taxation and social security 396 478 (75) 122

Accruals and deferred income 4,352 6,894 789 197

Other creditors 12,440 16,331 4,296 48

Capital Grant Recycling Fund 3,997 916 - -

Disposal Proceeds Fund 1,100 455 - -

40,245 27,785 8,152 367

Group2005

Group2004

Payments to creditors

Average number of days between receipt and payment of purchase invoices 13 13


17. Creditors: Amounts falling due after more than one year

Group2005

£’000

Group2004

£’000

Loans (note 18) 167,361 153,734

Deferred income 1,344 1,402

Capital Grant Recycling Fund 6,148 7,141

Disposal Proceeds Fund 1,213 1,393

Other 1,529 1,109

177,595 164,779

The deferred income represents the premium on the HACO loan, net of issue costs. This premium will be amortised over the period of the loan.

26

18. Loan analysis

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Due within one year:

Bank overdraft 3,142 - 3,142 -

Bank loans 908 1,246 - -

Orchardbrook Limited (originally the Housing Corporation) loans

29 22 - -

Other loans 12,609 322 - -

16,688 1,590 3,142 -

Due after more than one year:

Bank loans 114,717 100,397 - -

Orchardbrook Limited (originally the Housing Corporation) loans 5,839 5,864 - -

HACO 25,000 25,000 - -

Other loans 22,281 22,914 - -

Capitalised costs (476) (441) - -

167,361 153,734 - -

Loans are repayable as follows:

Within one year 16,688 1,590 - -

Between one and two years 1,603 1,553 - -

Between two and five years 19,161 36,651 - -

After more than five years 146,597 115,530 - -

184,049 155,324 - -


Loans and finance leases to the value of £181 million (Parent Company: £Nil) are secured by a combination of fixed and floating charges on individual properties.

The loans from Orchardbrook Limited are repaid in half-yearly instalments over the estimated life of the scheme on which the loan is secured, at fixed rates of interest ranging from 9.50% to 10.625%. The final instalments are due for repayment in the period 2005 to 2037. The final instalments

on bank, HACO and other loans are due for repayment in the period 2006 to 2029.

Out of the total of loans and finance leases of £181 million (Parent Company: £Nil) interest is payable at fixed rates varying from 5.05% to 16.5% on £124 million (Parent Company: £Nil) and at rates linked to LIBOR on the remaining £57 million (Parent Company: £Nil). Of the floating rate £20 million is hedged to reduce the exposure to interest rate movement.

27

19. Annual obligations under operating leases


Group2005

£’000

Group2004

£’000

Operating leases on land and buildings which expire:

Within one year 4,184 643

In the second to fifth years inclusive 7,301 10,424

Over five years 1,638 1,869

20. Provision for liabilities and charges

GroupDilapidation

Repair2005

£’000

GroupDilapidation

Repair2004

£’000

At 1 April 2004 and 31 March 2005 100 100

21. Non-equity share capital

2005£’000

2004£’000

Shares of £1 each issued and fully paid:

At 1 April 2004 49 49

Shares issued during the year - -

Shares surrendered during the year - -

At 31 March 2005 49 49

The shares provide members with the right to vote at general meeting, but do not provide any rights to dividends or distributions on winding up.

28

22. Reserves

Revaluation£’000

Restricted£’000

Designated£’000

Consolidated£’000

Revenue£’000

Total£’000

GROUP

At 1 April 2004 192,136 2,912 1,953 263 45,516 242,780

Surplus for the year - - - - 4,698 4,698

Property revaluation adjustment 17,570 - - - - 17,570

Transfers (372) (1,121) 1,538 - (45) -

At 31 March 2005 209,334 1,791 3,491 263 50,169 265,048

Restricted£’000

Designated£’000

Revenue£’000

Total£’000

PARENT

At 1 April 2004 - 1,702 680 2,382

Surplus for the year - - 562 562

Transfers 1,750 (1,221) (529) -

At 31 March 2005 1,750 481 713 2,944

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Restricted reserves comprise: -

Donations 41 200 - -

Giftaid from East Choice Limited to Parent 1,750 - 1,750 -Reinvestment fund - transferred to designated reserves - 2,712 - -

1,791 2,912 1,750 -

Designated reserves comprise:

Major repairs new funded schemes 2,066 218 - -

RCGF & DPF 911 - - -

Giftaid from East Choice Limited to Parent 514 1,735 481 1,702

3,491 1,953 481 1,702


The Group plans its financial affairs to ensure that each year revenue income exceeds revenue expenditure. This policy ensures that the Group has a margin of safety to manage unexpected expenditure or shortfalls in income. The annual surpluses ensure that East Thames Group Limited is able to meet its commitment to providers of

private finance and continue to provide social housing. Unlike commercial organisations the Group’s rules prevent the distribution of reserves. Instead, these are applied to furthering our aims and objectives. At 31 March 2005 the Group’s reserves were all used in financing investments in social housing.

29

23. Financial commitments

Group2005

£’000

Group2004

£’000

Capital commitments

Expenditure contracted for but not provided in the accounts 50,649 93,455

Expenditure authorised by the Board but not contracted for 12,515 52,100

63,164 145,555


Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Operating surplus before taxation 14,149 16,966 933 850

Depreciation of fixed assets 1,946 1,180 462 -

On sale of other fixed assets 31 442 - -

On sale of housing properties (4,585) (6,410) - -

Net increase/(decrease) in provisions (522) (54) - -

11,019 12,124 1,395 850

Movement in Working Capital

(Increase)/decrease in stock (3,991) 6,891 - -

(Increase)/decrease in debtors 1,101 (2,457) (6,394) 919

Increase/(decrease) in creditors (3,157) 10,470 4,643 (82)

Net cash inflow from operating activities 4,972 27,028 (356) 1,687

24. Reconciliation of operating surplus to operating cash flows

30

Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

(Decrease)/Increase in cash in the period (1,018) (728) (4,124) 982

Cash inflow from increase in debt and lease financing (25,583) 12,008 - -

Change in net debt resulting from cash flows (26,601) 11,280 (4,124) 982

Net debt at the start of the period (153,047) (164,327) 982 -

Net debt at the end of the period (179,648) (153,047) (3,142) 982

25. Reconciliation of net cash flow to movement in net debt


Group2005

£’000

Group2004

£’000

Parent2005

£’000

Parent2004

£’000

Cash at bank and in hand 4,398 2,275 - 982

Bank overdraft (3,142) - (3,142) -

Loans due within one year (13,546) (1,590) - -

Loans due after more than one year (167,359) (153,732) - -

(179,648) (153,047) (3,142) 982

26. Analysis of net debt

31

iii

Our valuesWe will be customer focused• responding to what our customers say• providing excellent and reliable services• enabling customer choice

We will be ambitious• creating new approaches to service delivery• producing excellent outcomes• striving for excellence in everything we do

We will be professional• being straightforward in everything we do• adopting a flexible approach

to delivering services• demonstrating a respectful approach

to our customers• being open, reliable and consistent

We will be leaders• empowering our staff to act responsibly• showing creativity in service provision• inspiring those who work with us• campaigning on key issues

Our missionTo make a positive and lasting contribution to the neighbourhoods in which we work.

Our key aims1 Providing high-quality homes and services

that meet the needs of our customers.

2 Ensuring that our customers can influence our services.

3 Influencing local, regional and national thinking, policies and strategies.

4 Developing well informed, committed and enthusiastic staff.

5 Actively using our financial and organisational strength.

Mission, Aims and Values

iv

Registered Office3 Tramway AvenueStratfordLondon E15 4PN

Switchboard: 020 8522 2000Fax: 020 8522 2001ConnectDirect: 0845 600 0830Minicom: 020 8522 2006www.east-thames.co.ukRegistered by the Housing Corporation, No. LH4309Registered under the Companies Act 1985, No. 4091100Registered charity 1084952Member of the National Housing Federation

Designed by Hoop Associates www.thisishoop.com

Documents

Group Accounts 2005