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SouthwaySouthway Housing Trust(Manchester) Limited2013-2014Financial Report

Your home, safe in our hands

14272A_Southway Accounts v8__ 15/09/2014 16:53 Page 1

2013/14 was another greatyear for Southway Housing Trust.We delivered improvementsacross a number of our corelandlord services and continuedto invest in improving our homesand the neighbourhoods wework in.

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EmmaRichmanChair of the Board


BoardMembers, Executive Directors, Advisors and Bankers 5

Report of the Board and the Operating and Financial Review 6

Introduction by the Chair 6

Corporate Strategy 7

Investment Strategy 10

Value for Money Statement 18

Finance and Risk 31

Constitutional Business and Governance 36

Independent Auditor’s Report 44

Income and Expenditure Account 46

Statement of Total Recognised Surpluses and Deficits 47

Reconciliation of Movements in the Trust’s Funds 47

Balance Sheet 48

Cash Flow Statement 49

Notes to the Financial Statements 50

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Contents


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Board Members, Executive Directors,Advisors and Bankers

Board

ChairEmma Richman

Other MembersIain LevistonJohn GallagherJane ArcherCouncillor Jeff SmithCouncillor Bev CraigLiamMurphy

Vice ChairSamantha MacWilliam

Roger SpencerCouncillor Joanna MidgleyMichelle Duhaney (from 17 September 2013)Memuna Bangura (from 17 September 2013)Geoff Penny (until 17 September 2013)Claire Davies (until 30 July 2013)

Executive Directors

Chief ExecutiveKaren Mitchell

Director of Finance and Resources,and Company SecretaryNeil Botfish

Director of Neighbourhood ServicesRay Smith

Director of Regeneration andAssetManagementJane Gant

Registered office

Aspen House,825Wilmslow Road,Manchester, M20 2SN

Registered numbers

Registered Industrial & Provident Society 30348RRegistered by theHomes&Communities AgencyNo: L4507

External Auditors Internal Auditors

Grant Thornton UK LLP4 Hardman Square,Spinningfields, Manchester, M3 3EB

DWF (Formerly Cobbetts LLP)1 Scott Place, 2 Hardman Street ,Manchester M3 3AA

Anthony Collins LLP134 Edmund Street, Birmingham B3 2ES

TIAA Ltd53-55 Gosport Business Centre,Aerodrome Road, Hampshire, PO13 0FQ

Barclays Commercial BankLevel 27, 1 Churchill Place,London, E14 5HP

Solicitors Bankers


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Introd

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nReport of the Board and the Operatingand Financial Review

The Board presents its Report and audited Financial Statements for the year ended 31March 2014.

Introduction by the ChairI ampleased to present the Board’s Annual Report and audited statutory accounts for the financialyear 2013/14.

2013/14was another great year for SouthwayHousingTrust.Wedelivered improvements across a numberof our core landlord services and continued to invest in improving our homes and the neighbourhoodswework in.

OurDevelopment andAcquisition Programme really got underway this year and Iwas very proud to attendthe opening of our first significant development atMersey Bank.This development demonstrates the typeof organisation thatwe are andwhere our priorities lie.WorkingwithManchester City Council, BarlowMoorCommunity Association (BMCA) andour contractorWates, we have provided a new focal point for thecommunity.The BarlowCentre has provided BMCAwith a newbuildingwhere they can improve theirexisting services and extend the service offerwithmore space for a youth zone, an outreach library, earlyyears provision and a learning hub.The development also includesmuchneeded smaller homesfor affordable rent,made available to local peoplewhowanted to downsize, freeing up family homes.

This projectwaspossible due toour strongpartnerships and real focus on theneedsof our communities.Whilst our corepurposewill always be toprovide excellent social housing,wewant touseour strengthandposition in the community todomore.Wehavemanagedour resourceswell, achieving value formoney,and aswell as buildingnewhomes,we are nowalso able tomake a significant investment in our communitiesthroughour social investment programme.

I look forward to further achievements over the coming years.

EmmaRichmanChair

Our aim is towork in partnershipwith localgroups,Manchester City Council and otherstakeholders to improve the quality of life of ourtenants andother residents and tomake southManchester a great place to live.

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Corporate StrategySouthwayHousingTrust is a community based social landlordworking in the Chorlton, OldMoat,Withington, Didsbury andBurnage areas of southManchester. Established in 2007 to take over theownership,management and improvement of almost 6000 council ownedhomes, theTrust is ambitious forthe people and communities it workswith. Our aim is towork in partnershipwith local groups,ManchesterCity Council and other stakeholders to improve the quality of life of our tenants andother residents and tomake southManchester a great place to live.

TheTrust’s vision, objectives andpriorities are set out in our Futures Strategy, adopted in 2010.

Each year a corporate plan is setwhich defines the actions thatwill be taken tomove us towards our vision,brokendown into defined taskswith challengingbut achievable timelines.The latest corporate planwas setinMarch 2014.

The Futures Strategy has 8 themeswhich clearly set out our priorities and the areaswherewewill focus ourresources.Wewill:-

1.Provide homes thatmeet the Southway Improvement Standard (which exceeds the“Decent Homes”Standard).

2.Deliver excellent landlord services thatmeet tenants’needs andpriorities.

3. Improve the quality of life of our older tenants.

4. Increase the supply of and access to affordable housing options for people on the housingwaiting list.

5.Be an exemplary landlord in thewaywe support the independence of our tenants andpromote ourcommunities.

6.Achieve environmental sustainability targets.

7.Drive and contribute to the place shaping of our neighbourhoods,making themost of our position as acommunity focused organisation.

8.Be a strong, financially viable, well run organisation thatmaximises thewayweuse our assets to achievesocial value.

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Southway obtained the prestigious‘Customer Service Excellence Award’in 2012. This is independently auditedeach year, and was retained in 2013.

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Examplesof keyachievements inour services andcommunities in2013/14 include:

(a)Completion of a £13menvironmental improvement programme.

(b)Delivery of Southway’s first newhomes at the BarlowCentre, which has 13 residential flats and a newcommunity centre.

(c)A surplus of over £600kwas generated by the direct labour repairs service, whichwas invested in otherservices. Thiswas despite the service having consistently raised its charges by less than inflation.

(d) Southway led a project to improve themutual exchange service, with 21 Registered Providers (RPs)signing up to aMutual ExchangeCharter.

(e) The opening of the BurnageOutreach Library in partnershipwith the Friends of Burnage Library andManchester City Council.

We also continued to improve the internalmanagement and effectiveness of the organisation including, forexample:

(f) The launch of‘HowWeWork’, a performancemanagement frameworkwhich establishes a consistentmeans to appraise, support anddevelop staff across the organisation.

(g) Substantially upgraded a number of our IT facilities including the finance system, andnewe-finance arrangements.

(h) Set up new systems formaintaining stock datawhichwill be used to informmaintenance andinvestment planning.

(i)Created a distinct Social InvestmentTeam.

(j)Rolled out an IncomeMaximisation Strategywhich establishes a focus for staff to contributeto the principles of Rent First and Every Contact Counts.

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Opening BurnageOutreach Library


Keyobjectives for 2014/15are:

(a) The delivery of 24 newhomes as part of a 3-year strategywhichwill deliver 130 homes by 2017.

(b) The opening of a community facility and learning hub at BuckthornHouse on theArrowfield Estate.

(c)AchievingHousemark accreditation for our Anti-Social behaviour service.

(d) Launching the Southway Reward schemewhichwill establish a new relationshipwith our tenants andsupport a rent payment culture.

(e)Abusiness feasibility assessment for the provision ofmarket rentedproperties.

(f)Delivery of 3 key projectswithin theOldMoat Age-friendly neighbourhood strategy.

(g) The opening of a small enterprise centrewith at least 10 newbusinesses tomake use of the facility.

Further details of our investment achievements andplans are set out in the succeeding section.

During 2014/15 a fundamental reviewwill be undertaken of our Futures Strategy, a processwhich started inMay 2014. A newStrategywill be adoptedbefore the endof the year, setting our next set of objectives andpriorities for the period 2015 to 2020.

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Opening of 13 flats and the BarlowCentre for the community


Southway came into being in 2007when the former council housing stockwas transferred, and its initialtaskwas to bring those properties up to the Southway Improvement Standard (which incorporated thegovernment’s Decent Homes Standard). This achieved, it has in the two years toMarch 2014 expanded thescope of investment, whichwill widen further over the next 3 years, covering 4 areas.

• Investing inNewHomes• Investing in theHousing Stock• Investing in the Environment• Investing in Communities

Our achievements andplans are summarised below.

1. Investing inNewHomesDuring 2013/14 Southway built its first newhomes andhas established a programmeof newbuild through toMarch 2017.

The developmentswill all bewithin Southway’s locality andwill be let in linewith the sharedManchesterAllocations Policy through theManchesterMove service.The programmewill seek tomaximise land that iscurrently under-developed to both regenerate local neighbourhoods andprovide homes to those ingreatest need. At this stage, the focus is on providing smaller homes for affordable rent, supporting thoseaffected bywelfare reform, and to increase the range of housingwe can offer to older people.

15 newhomeswere let during 2013/14.These included the 13-unit BarlowCentre.

Southway is planning to build a further 130 newhomes over the 3 years to2017; 24 of thesewill be built in 2014/15.

Southway also prioritises bringing private empty homes back into use asAffordable rented homes.This is being done in partnershipwith theHomes&Communities Agency (HCA) and theAssociation of GreaterManchesterAuthorities (AGMA). 7were acquired byMarch 2014, andwe aim to acquirea further 11 in 2014/15.

Value forMoney is a key considerationwhen looking to build or acquire newhomes. Rates of subsidy arestrictly controlled based on sector norms.To ensure that our costs are reasonablewe are carrying out athorough reviewof the productsweuse, the standards thatwe set and thewayweprocure ourworkwithour contractors. This is about ensuring quality aswell as the best cost and longer termbenefits for ourtenants.

Tomake sure our newhomes are future proofed all homes are built to a high energy efficiency performanceso that tenants canmaximise savings on their heating bills. All NewBuild are currently specified to EPC LevelB (rather thanC). They are also built to our digital access standard, to ensure residents can havewirelessaccess to the internet, and to LifetimeHomeprinciplesmeaning that the layout anddesigns are able tosupport people as theymove through their lives.

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Investment Strategy


2. Investing inOurHousingStockSouthway’s initial central objectivewas to transform the physical condition of its homes over the 5 years toMarch 2013.

Southwaywas required to achieve 100%of properties at the government’s Decent Homes Standard, butactually set its ownhigher Southway Improvement Standard.This is fully set out in the table below.

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Windows Windows should be no more than 40years old (30 in flats) and be repairedor replaced if in poor condition.

We exceeded the standard by replacingall windows with PVCu double-glazing.Three choices of design were offered.

Kitchens andBathrooms

There are two different standards forkitchens and bathrooms: Kitchensshould be no more than 30 years oldand have adequate space and layout,and bathroom facilities should be nomore than 40 years old. Or kitchensmust be no more than 20 years oldand bathrooms no more than 30 yearsold with layout issues in the kitchen.

We exceeded the standard, replacing allkitchens and bathrooms that had notbeen improved since 2000. A range oftenant choices were made availablewhere appropriate, for example worksurfaces and units. Where kitchens thatwere improved prior to 2007 were inpoor condition due to fair wear andtear, we improved to current standards.

Toilets All homes must have an inside toiletwith wash hand basin.

If there was not an upstairs toilet wefitted one, subject to space andplumbing issues.

Heating Boilers should be no more than 15years old and heating systems nomore than 40 years old. To be repairedor replaced if in poor condition.

We matched the standard by replacingall boilers that were obsolete andupgrading any systems where required.

External Doors Doors should be no more than 40years old (30 in flats) and be repairedor replaced if in poor condition.

We exceeded the standard by replacingall doors and frames, giving residentsincreased security.

EnergyEfficiency

Homes should have a reasonabledegree of thermal comfort with bothefficient heating and effectiveinsulation.

We used A rated boilers and B ratedwindows, and installed cavity wall, loftand external insulation as required.Wealso fitted efficient radiator systems andcarried out energy efficiency awarenessto help reduce fuel poverty and save onheating bills.


The full programmebudget, adjusted for inflation and forproperties lost to Right to Buy,was £115mat actual prices.In the event, £22m savings against budgetwere achievedfacilitating an expandedprogramme into 2014. ByMarch2014 £116mhadbeen invested.

Themainwork carried out in 2013/14was to homeswhere the tenant had initially refused the improvementwork, and to replace a number of kitchenswhich hadbeen installed in the few years before the stock transferredto Southway, butwhich needed early replacementbecause of the poor quality of the original fittings.

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Element Decent Homes Standard What We Did

Roofs Roofs should be no more than 50 yearsold (30 in flats) and be repaired orreplaced if in a poor condition.

We matched the standard by repairingor replacing any defective roofs.

ElectricalSystems

Electrical systems should be no morethan 30 years old and be repaired orreplaced if in a poor condition.

We matched the standard by eithercomplete or partial rewiring.

Adaptations Not part of the standard. We ensured any necessary adaptationswere carried out alongsideimprovements works.

Environmentaland SecurityImprovements

Not part of the standard. We invested in environmental works,including improved parking provisionand widening of narrow Cul-de-Sacs,improvements to green spaces andlandlocked sites, improved boundariesat properties and improvements tobungalow sites across the area.

NonTraditionalProperties

Not part of the standard. We exceeded the standard by providingall necessary improvements to securethe long-term future of theseproperties, including externalinsulation, render and structural work asrequired.

End of Home Improvement Programme

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The number of different components replaced is given below:

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Improvement

NumbersProjectedatTransfer

ActualNumberRequired

NumberCompletedtoMarch2014

2013-14Targets

2013-14Completions

NewKitchens 4,510 4,998 4,864 524 390

NewBathrooms 5,911 5,381 5,363 198 180

UpstairsToilets 1,965 1,300 1,118 214 32

DiatomitePlastering - 330 330 150 141

NewWindows (No.properties)

5,911 5,768 5,768 5 10

NewDoors 4,170 9,856 9,856 5 10

NewRoofs 1,287 1,668 1,668 - 2

NewBoilers 3,451 5,566 5,538 283 255

Newelectrics 1,883 1,713 1,708 58 53

Loft InsulationandTop-ups

1,519 1,519 100 45

CavityWall Insulation–new/top-up

3,257 3,793 3,793 - 2

LeadMainsReplacement

- 514 514 - -

Chimneys 1,254 1,849 1,849 - -

ExternalCladding 537 882 882 - -

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100%of propertiesmeet theDecent Homes Standard. Going forward, Southwaywill invest to ensure that itmaintains compliancewith the Southway Improvement andDecent Homes Standards.

Southway has continued toworkwithManchester City Council to support tenants to staywithin theirhomes. Onemeans of doing this is through the provision of equipment and adaptations to properties, usingthe Council’s access to government funding (60%) and Southway’s own resources (40%). FromTransfer toMarch 2014, this has supportedmajor adaptations to 600 homes, 65 of these in 2013/14.

Southway conducts a tenant satisfaction survey bi-annually. In 2012, 87%expressed satisfactionwith theoverall quality of their home, and 83%with the general condition of their property.This places Southway inthe top 10%of housing organisations surveyedby Kwest on these twomeasures.

3. Investing in the EnvironmentSinceTransfer Southway hasmade substantialinvestment in the physical environment of itsneighbourhoods.Themajority of thisworkwasperformed in the two years toMarch 2014.

Southway had a £13mbudget (at 2013prices), andprioritieswere set followingwidespread consultationwith tenants.The key priorities chosen, andworkthendelivered,were:

• The reconfiguration of 72 cul-de-sacs serving 700homes.The designs created space for parking andturning inwhatwere extremely narrow roads. Inaddition surfaces andboundarieswere upgraded.

• Improvedparking at 10 sites

• A£2.6m regeneration of theArrowfieldneighbourhood to dealwith the existing andproblematic layout.Work included individualboundary and securitywork, the closing ofpassageways thatwere used for anti-socialbehaviour, and the reformulation of pathways androads to create a safer andmore attractiveenvironment. Green spaceswere improved andenhanced and included the installation of play andkeep fit equipment for all age groups.

• £2.4mof investment in newand replacementboundary treatments across Southway’s stock.Programmeswere designed to get value frombulkcontracts, improved security and replaced a reactivemaintenance approach.

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WoodleaAvenue - Before

Woodlea Avenue - After

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• Investment in 17 bungalow sites following consultationwith residents, who indicated theirmainconcerns as being security and access. As a result investmentwasmade to secure andmakemore attractivecommunal areas, create defensible space in front of properties, refurbish andwidenpathways to enableeasier access for tenants and for emergency services, and upgrades to lighting.

• Improvements to 14 green space sites of varying size. Southway developed a planting schedulewith avariety of trees, shrubs andplants specifically chosen to provide year round interest and ecological benefits.Gentle landscapingwas introduced to offer protection to cars fromactivity on the green space, and featuresto encourage informal play.

A satisfaction survey in early 2014 revealed that

• 84% said parking improvements eased congestion and reducedparking problems

• 84% said theywere satisfiedwith the quality ofwork carried out

• 82%were satisfiedwith the ongoingmaintenance of thework

• 78% said theworkwas a success andhas improved the area

Southway intends to invest £650k a year improving the environment for the next 3 years. In 2014/15 thepriorities continue to be the enhancement of green spaces, improvedparking, and resolution of boundariesand land locked sites.

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Tenant Satisfactionwith Environmental Improvements

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4. Investing in the CommunitySouthway has recognised that physical investment needs to bematchedbymeasureswhich support localpeople to enhance theirwellbeing and to promote independence. A range ofmeasureswere begun in2012, and these now forma Social Investment Plan running from2014/15. Our social investmentworkcurrently covers fourmain areas – employment and training, support for community associations andcommunity services, environmental sustainability anddelivery of our age-friendly strategy.

The key strands of Southway’s approach are:

• towork in partnershipwith awide range of other organisations to deliver a series of Age Friendly projectsto our tenants

• to develop anAge Friendly approach to all aspects of ourwork internally

• to facilitate practical employment-centred training for local people

• to provide apprenticeship opportunities and encourage our building andother contractorsto do likewise

• toworkwith local groups to develop andoperate community activity hubs, andmake effective use ofcommunity buildings

• to provide energy efficient homes and support, helping tomeet government carbon targets, and savetenants’money

• to play a full role in the City’s strategy towidendigital access

• to engage younger residents in a range of positive activities that improve their future opportunities

• to support local people into volunteering activity throughourTimebank

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Age Friendly Projects Improve Digital Access

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During 2013/14we achieved the following outcomes:

• 46 tenants secured employment following their engagement in training serviceswe facilitated

• 600 local people accessed those training services

• 900 hours of volunteeringwere arranged throughourTimebank

• Southway commenced five apprenticeships

• 44 local people over-50 participated in Access@Home ICT training

• 340 tenants received energy switching and energy efficiency advice, achieving average annual savings of£289 per household.

• Over 550 tenants switched to a cheaper energy supplier

Southway currently owns 2 community buildings – the BarlowCentre andWestcroft Road, and isresponsible for Burnage Library on a lease fromManchester City Council.Wehave formal partnershipagreements in place at Burnage Library and the BarlowCentre, withWestcroft Roadmanageddirectly bySouthwaywith the help of local volunteers. A fourth community facility, BuckthornHouse, is expected to beacquired in 2014/15.Wewill also continue our support, both financial andpractical for a number of othercommunity and voluntary organisations delivering essential services in our communities.

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Westcroft Community Activity Hub

Timebank up and running

Energy Saving Award

Apprentices in Employment

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Value for Money Statement

1. Approach to VFMSouthwayHousingTrust adopted a three yearValue forMoney Strategy in July 2012which states thatweare committed to delivering value formoney and that achieving value formoney influences andunderpinsthe delivery of theTrust’sVision andObjectives.The Strategy also includes:

• the approacheswewill takewhen seeking value in everyday decisions,• specific projectswhere there is potential to increase value,• steps tomeasure value and account for how resources are used.

TheVFM statement belowdemonstrates howwe aremeeting the commitments containedwithin thestrategy and that consideration of value formoney is embeddedwithin our organisation, aswell as howwecomplywith the expectations of theHCA’sValue forMoney Standard. A schedule summarising evidence ofcompliancewith the Standard canbe foundon theTrust’swebsite.

Southway considers the value formoney of its services in the context of performance, tenant satisfactionand cost (summarised in sections 2 to 5 below). Each of these factors is assessed against trends and sectorbenchmarks.Where performance is below target, or a service judged to be costly, improvement plans areput in place.Where results are above target the potential for an efficiency saving is also considered.

The budget for 2014/15was approved following collaboration betweenmembers of the Finance teamandOperationalManagers.Managers defined their team’s objectives andpriorities,and submitted their budgetproposals after identifying efficiencies for the forthcoming year (referred to in sections 6 and 7) eachoperational and central support teamhas reviewed the range of its activities and identified a seriesofVFMactions for the year ahead.Targets have beenquantified and thesewill be reviewedon aquarterlybasis during 2014/15.

The savings and efficiencies noted in this statement are available to fund the development and acquisitionof newhousing and expand the range of services offered to tenants and the communities of SouthManchester. Howwemanage our assets (section 8) and consideration of Social Return on Investment(section 9) are the key factorswhich aid Southway’s decisionmakingprocesseswhendetermining how todeploy theTrust’s available resources.

The tables, charts, case studies and commentary in theVFM statement provide evidence to stakeholders asto Southway’s achievements, and its future plans to deliver value formoney (noted in section 10 and inadditional information available on ourwebsite).

2. Operational PerformanceA summary of operational performance outcomes achieved in 2013/14 are set out below.This includes anassesment of Southway’s quartile performance compared to other Registered Providers across the countrywho submit information to theHousemark benchmarking club.

Commentary is also provided to illustrate howvalue formoney is consideredwhen setting targets foroperational performance.

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Performance on the core landlord functions of Repairs, Relets and Rent Collection are detailed in section 6.

Additional performance achievements:

• 100%of response repairs delivered in the emergency andurgent categories.• 100%of homes received an up to date gas safety certificate• 100%of homes remain asDecent Homes• 98.0%of calls to SouthwayConnect answered

TheTrustwill usually set targets that equal or exceed the performance of the previous year as part of ourcommitment to continuous improvement. Howeverwe are sensitive to the fact that performance shouldnot be to the detriment of achieving value formoney, or customer satisfaction.The asterisked figureswithinthe table above canbe explained as follows:

* It is possible that the target for void loss as a%of rent could be further reduced, but it is likely that thiscould only realistically be achievedby either revising the void standard or expecting incoming tenants tomove inwith less notice, both ofwhich could prove to be counterproductive in the long-run.

** Although a lower target has been set for average time taken to answer inbound calls than the 2013/14outcomewebelieve that this still represents acceptable service, and is in linewith the expectations ofcustomerswhouse our contact centre.To set a lower targetwould requiremore staffing resource andwouldnot represent value formoney.

*** Target has been adjusted to take account of the introduction ofWelfare Reform.

3. Customer Service Standards and SatisfactionSouthway aspires to the highest standards of customer service. Since 2010/11 it has followed andcontinuously developed the internally devised“EveryoneMatters”framework for staff and servicedevelopment.Management focuses onboth the speed andquality of responses to customers andhas arange ofmeasures to assess both these and the degree of customer satisfaction achieved.

2012/13Outcome

2013/14Target

2013/14Outcome

2013/14Quartile

2014/15Target

Repairs completed on time 99.9% 100% 99.8% 1 100%

Average end-to-end time for allreactive repairs (in days)

5.2 Quartile 1 4.3 1 4.3

Average Relet time forMinorVoids(in calendar days)

19 16 17 1 16

Void losses as a%of rent 0.6% 0.7% 0.5% 1 0.7%*

Average time taken toanswerinbound telephonecalls (in seconds)

34 20 13 2 19**

Percentage of annual rent collected 99.8% 99.3% 99.1% 3 99.1%***

Year-end rent arrears (currenttenants) as a%of year’s rent

8.0% 7.3% 7.9% 4 7.3%

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2012/13Outcome

2013/14Target

2013/14Outcome

2014/15Target

Connect (CustomerService Centre)

96.3% 95% 95.0% 95%

Repairs Service 95.3% 95% 97.7% 97.7%

Home ImprovementProgramme

93.8% 95% 95.0% 95%

EnvironmentalProgramme

91.6% 95% 98.0% 95%

New tenants satisfiedwith their home

95.0% 95% 98.0% 95%

Groundsmaintenanceservice

95.0% 95% 96.0% 95%

Southway obtained the prestigious‘Customer Service ExcellenceAward’in 2012.This is independentlyaudited each year, andwas retained in 2013.The assessor has particularly identified our new staff inductionprocess and revised approach to complaints as areas of goodpractice.

A general survey of tenants is carried out every two years. The 2012 survey showed anoverall satisfactionrating of 86% (up from85% in 2010 and 79% in 2008). The overall satisfaction ratingwas in linewith themedian result across the sector.

Detailed below are satisfaction rates achieved in 2013/14 following specialised customer surveys:

All of thesemeasures achieved their target, and all but one represented an improvement on the prior year.The exception, satisfactionwith our Customer Service Centre, is due to some inconsistency in getting backto tenants as quickly aswe initially advised them.Thisweakness, which creates an inefficiency in servicedelivery aswell as affecting satisfaction, is nowbeing specifically addressed.

Targets for 2014/15were set in away that allows us to report a high level of customer satisfaction andtherefore strongperformance,without committing excessive resourceswhich could affect efficiency, orcreate extra cost.

4. Operating CostsAn annual reviewof total operating costs is carried out each year. This is structured as aGlobal EfficiencyStatementwhich analyses, relative to inflation, how total spending varies year on year. It shows the costpressures on expenditure, the scale of efficiencieswhich have beenmade, andwhat newactivities arecarried out for the first time, funded from savings.

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Operating Cost Base b/f 11,268 11,391

Inflation (2.6% in 13/14, 3.2% in 14/15) 293 365

Impact ofWelfare Reform on Rent Collection 220 -

External Cost Pressures 246 262

Cost (Reductions)/Increases (301) 330

Inefficiencies 119 -

Efficiencies

Repairs and maintenance 323 293

Management staff salaries 168 218

Office accommodation rent, cleaning 66 35

Printing, postage, stationary 30 8

(587) (554)

New Social Investment 58 630

New Financial Inclusion 75 100

New Rent Incentive Scheme - 150

New Painting Programme - 167

Operating Cost Base c/f 11,391 12,841

Global Efficiency Statement

2013/14£'000

2014/15£'000

“External Cost Pressures” relate to matters over which the Trust had no control in the short term. Examplesmight be the need to spend in response to new legislation, or an increase in the number of staff on maternityleave, or increasing resources to manage welfare reform. “Cost Reductions/Increases” relate to changes in costlevel which are the Trust’s choice but do not relate to any question of efficiency. Examples might be the cost of asurvey being carried out in 1 year but not the next, or a decision to expand or contract a service.

The table also identifies inefficiencies of £119k.This reflects a £68k increase in disrepair compensation claimsand legal costs, and a £51k increase in housing property andother insurances. Both areas are subject tomore detailed assessment during 2014/15 to prevent costs rising again during the coming year.

In 2013/14 the Trust’s overall operating cost base did not grow at all in money terms other than for new SocialInvestment activities andnewFinancial Inclusion spending - designed to tackle the difficulties experiencedon rent collection in response toWelfare Reform changes.

The table below tracks spending in 2013/14 relative to the cost base in 2012/13 excludingmajor repairsexpenditure. It also looks forward to consider the levels of spendingwhich are due to take place in 2014/15.Savings and efficiencies totaling £587k (5.2%of the operating cost base) have been achieved in 2013/14,and an extra £554k (4.9%) is to be delivered in 2014/15. Further details are provided in sections 6 and 7.

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In 2014/15 the operating cost base is budgeted to increase by the equivalent of inflation plus:

• NewSocial Investment – doubling the scale of existing spending to £1.2m.• NewFinancial Inclusion expenditure and a newRent Incentive Scheme–designed to reward continuousrent payment andpositive tenant behaviours.

• Commencement of a new cyclical painting programme.

5. Social Housing Lettings CostsWith the endof themain home improvement and environment programmes theTrust’s total social housinglettings costs have fallen sharply. Southway now resembles a traditional housing association undertakingimprovementworks on a cyclical basis in linewith its stock condition survey.

The chart belowplots total social housing lettings costs (which includes allmanagement,maintenance,major repairs, depreciation, service andbaddebt costs). The data is for 2013 and is fromawide range ofregistered providerswhich aremembers of the Placeshapers group.

Southway’s results andprojections are identified separately:• 2012/13 outturn – orange circle• 2013/14 outturn – green square• 2014/15 budget – red cross

Aswell as illustrating the reduced spendonmajor repairs, the chart also reflects the efficiencies referred topreviously for 2013/14 and 2014/15.Where as theGlobal Efficiency Statement shows how savings areredirected into newactivities such as Social Investment and Financial Inclusion, total social housing lettingscosts doesn’t include these additional discretionary categories of expenditure, and so the efficiency saving ishighlighted.

Total Social Housing Lettings Costs Per Unit - 2013 Data

£0

£1,000

£2,000

£3,000

£4,000

£5,000

£6,000

£7,000

£8,000

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

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Units In Management

2012/13 outturn

2013/14 outturn2014/15 budget

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6. Core Landlord Functions

(i) Repairs and Relets

TheTrust’s in houseDLO team‘Property Services’has delivered its own3 year Business Plan during theperiod 2011-2014. Substantial efficiencies and savings have been achieved,without having a detrimentalimpact onperformance and tenant satisfaction. Efficiencies include greater productivity of operatives,reduction in the proportion of subcontractorwork, lower prices formaterials/services following tenders andreduced administration costs.

Southway’s responsive repairs service KPIs are in the top ten percent of Registered Providers in the country.Tenant satisfaction in the 2012 STAR surveywas 85%, just outside the topquartileThe cost ofmaintenancehas fallen substantially and is now in the topquartile of providers in the country. Over the three year periodof theDLO’s business plan the averagemaintenance cost per property dropped from£807 to £636 perannum.

Themaintenance savings totaled £323k in 2013/14 and an extra £293k saving is targeted in 2014/15 fromfurther efficiency gains such as the items referred to above. Additional details of the service improvementsand cost reductions delivered by theDLO canbe foundon theTrust’swebsite.There is also a summary of thenext steps being takenby Property Services to further enhance the repairs service, to ensure asmany jobs aspossible are completed right first time.

Improvements in relet performance have also beendelivered over the last three years. The average numberof days to relet aminor void property has been reduced from25 to 17 days. Southway is now in the topquartile of registered providers in terms of relet time and also voids rent loss. Additional details can be foundon theTrust’swebsite relating to empty property relet performance.

(ii) RentCollection

Arrears performance continues to be affected not just by formal reforms to the benefits system, but also byrelated changes in the practices of the benefits authorities, in particular the speedwithwhich benefits aresuspended. Southway’s collection rates are in the third quartile of registered providers. Total arrears as apercentage of rent due is in the bottomquartile –which is impactedby the high level of arrears acquiredfromMCCon transfer.

2013/14was the first year inwhich tenants facedbenefit reductionswhere deemed to be under-occupyingtheir homes.This affected aroundone in five of Southway’s tenants. It had the potential to adversely impact3%of the total rent roll. In the event Southway performedwell in these cases, with a collection rate of 99.6%.This reflected the efforts in our securing discretionary housing payments formany of the tenants affectedand also the action taken to secure backdated adjustments onpre 1996 tenancies aswell as a high profileawareness campaign and increased availability of advice services.

However, performance for other tenancieswas lower, with a 99%collection against a target of 101%ofannual rent. Performancewas clearly affected by the cumulative impact of the economic pressures on ourtenants, withmany of the recent gains fromnational economic growth not having reached ourcommunities to any significant degree. But Southway also accepts that a focus on tenancies impactedbythe‘under-occupation’rulesmay have distracted it fromwider risks, particularly thewider reductions inincome arising fromother parts of thewelfare reformagenda.

Southway continues to develop strategies in response towelfare reforms.These are aimed at supporting thehouseholds affected throughwelfare andmoneymanagement advice, arranging opportunities to increasework related skills, organising volunteering, and supporting thosewhowant tomove home anddownsize.

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ManagementCostsperunit 2011/12 2012/13 2013/14 2014/15

Southway £905 £1,025 £1,028 £1,035

Movement -9.2% 9.5% 2.2% 2.2%

RPI 4.6% 5.6% 2.6% 3.2%

HCAGlobal Accounts £908 £952 n/a n/a

The cost of this‘Financial Inclusion’and related advicework increasedby £75k in 2013/14 and a further£100k increase is planned in 2014/15. Spending on the Financial InclusionAdviceTeam is nowprojected tototal £360k per annum.The team estimates that during 2013/14 they helped tenants achieve financial gainsof over £1m in terms of additional income (includingwelfare benefits) anddebt relief.

Southway anticipates addedpressure on collection rates going forward. It faces a significant new risk fromthe phased switch fromHousing Benefit toUniversal Credit. This is likely to break the direct payment linkbetweenwelfare authorities and social landlords.The newRent Incentive scheme is designed to helptenants recognise it is their responsibility to pay rent to Southway.

Seeking to achieve significant improvements in performance Southway has put in place a fundamentalreviewof all its rent collection policies andpractices, with particular focus onbetter use of technology.Thisproject is due to complete in June 2015. Additional details can be foundon theTrust’swebsite. It involvesworking in partnershipwith a large regional association building on the success of their IT systems andrelated rent collection procedures.

(iii) NeighbourhoodServices andAnti Social Behaviour

Southway spent £200k on legal costs associatedwith tenancymanagement over the last three years. In2014/15 the extent towhichwork can bedelivered in housewill be assessed and in addition a procurementexercise carried out tominimise the residual external costs. Additional details of the various ASBprojects areavailable on theTrustwebsite.

Each operational andback office team in Southway reviews its activities, staff structure and staffing levels ona periodic basis to ensureworking practices are as efficient as possible.The above actionswill be part of awider reviewof themainNeighborhoodhousingmanagement team (the current structure dates from2010).

(iv) ServiceDeliveryReview

Southwaywill shortly begin a fundamental reviewof its service delivery arrangements for the social landlordservice.Thiswill considerwhether newmodels could deliver servicesmore efficiently, with a focus onusingnew technology and simplified procedures to reduce the cost of transactional services, releasing resourcesand staff time to provide support andmore flexible services to those tenants and issues requiring it. This is amedium termprojectwith options to be evaluated during the coming year, and implementation beginningduring the secondhalf of 2015/16, completing in 2016/17. The first full year of the resulting productivitybenefits is, therefore, likely to be 2017/18.

7. Corporate Functions(i) Management Costs

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Analysis of theTrustmanagement costs per unit over the last three years is shown in the preceding table.This also notes the budgetedposition for 2014/15 and annual inflation.

Southway’smanagement costs per unit are higher than the sector norm. Recognising the importance ofaddressing the situation theTrust carried out a comprehensivemarket pay review exercise. As aconsequence theTrust froze all pay bands untilMarch 2015 at April 2012 levels. This delivered efficiencysavings of £168k and £218k in 2013/14 and 2014/15 respectively, and resulted in a below inflationmovement inmanagement costs per unit noted above.

The Chief Executive and ExecutiveDirectors’salaries have also been reviewedby external consultants andassessed as being below themedian rate for the sector.

(ii)OfficeAccommodation

The relatively high cost location of Southway’s office premises in SouthManchester has also beenconsidered. Negotiationswith the landlord regarding the break clause for the office lease have successfullysecured an efficiency saving.TheTrust has committed to retaining its existing accommodation for the nextfour years. This resulted in a substantial rent free period amounting to a reduction of almost £500k over theperiod to 2018.

(iii) Communications

During 2013/14 a full reviewhas been carried out of theTrust’s internal and external communicationarrangements.This included a service and staffing reviewof the call center (SouthwayConnect), theappointment of a newCommunicationsOfficer, and the commencement of newdigitalmedia platforms(Facebook,Twitter). The benefits of bringing together previouslymulti teamapproaches into a singlecommunication rolewith cross team responsibilities is available on theTrust’swebsite.

Changes have also takenplace in the approach to handling complaints following a reviewby Southway’sscrutiny panel, with some increases in case handling satisfaction ratings resulting.

(iv) ICT

The strategic focus for ICT has beenondelivery of resilientwell performing systems that offer the best valueformoney,which follows taking over a number of systems thatwere both unnecessarily expensive andquite poor performing.The bulk of systems have nowbeen re-procured and re-built. Details of the new ICTarrangements are available on thewebsite.

Infrastructure assets, such as server systems, due for replacement in 2013/14 have had their service lifeextended.There has also been a reduction of incomingphone lines. Photocopier contractswere tendered,and combinedwith reducedpostage and stationary costs, savings of £38k have been achieved.

Non cashable improvements in ICT arrangements during 2013/14 included:

• Considerable effortwent into building up accurate asset data for propertiesmanaged resulting inefficiency improvementswithin Property Services &AssetManagement. A newComponent Accountingmodulewas also installed.

• iPads have been rolled out to seniormanagers and Boardmembers to reduce paper throughmoreelectronicworking, this is particularly relevant tomeetings in-house or off-site.

• Retendering themobile phone contract allowedus to growourmobileworking communications serviceswithout incurring any additional charges.

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• Takingwork in-house thatwas previously delivered by the supplier of theTrust’s Housingmanagementsystemallowedus update a greater number of software programmeswithout incurring additional cost.

• A newmodulewas introduced for electronic purchase order and invoice approval.

Aswell as themain rent collection initiative referred to earlier a number of additional ICT projects areplanned for 2014/15.These include:

• A staffing reviewof the ICT team.

• Introduction of enhancedmobileworking.

• Re-procurement ofwide area network services.

• Enhancement of customer contact interface to enhance front-line operations.

• Electronic documentmanagement filing for invoices andother corporate correspondence.

(v) Procurement

Southway has a procurement strategy and associated procedures that is usedby all staff whenprocuringservices to enable consistency and transparency. This enables the procurement process itself to be timeefficient, reduces risk of challenge andhelps to ensureweget the a quality service at the right time and atthe right price. A guide of 60%quality and 40%cost onprocurements has been set to ensure that focus ison longer term service delivery and life cycle benefits aswell as immediate financial gains.

In 2013/14 Southwayworkedwithin two frameworks; one formaterial supplies andone formaintenancework. In both of these efficiencieswere gained through savings from longer term commitments, bulkbuying power and improvedwarranties andguarantees. In addition a secondphase of newbuildworkwasnegotiatedwith a contractor saving 4%on earlier tendered rates and secured 5 employment and trainingopportunities for our tenants twoofwhich are permanent positions.

In 2014/15wewill be re-procuring direct labourmaterials supplies and insurance services. Both of these arehigh cost areas andwewill be seeking to achieve financial efficiencies through competition following fouryear arrangements. In the case ofmaterialswewill be seeking to achieve long termbulk buy arrangements,guaranteeddelivery times and streamlined administration. Onour insurance procurementwewill belooking to improve on service standards and response times aswell as on cost.

8. Managing our Assets(i) Use of Reserves

Southway is financially contributing to its newbuild development programme through theTrust'saccumulated reserves. Our Board has taken the decision to put in place additional internal investment in keyprojects (above thatwhich canbe financed from the net rental incomeof the newunits) to help delivermore affordable housing in SouthManchester.

Southway has achieved a number of efficiencies in previous years as noted in theValue forMoney section ofthe 2013 Statutory Accounts. This shows substantial savings. The operating cost base in 2012/13was £1.6mlower than 2009/10. Of this £860k is available to contribute to newdevelopment projects on an annualbasis. The remaining £750k is delivering significant community based social investment activities.

In 2014/15 Southway’s budget includes a £700k provision against the risk of increasedbaddebts arisingfromWelfare Reform changes and the implementation of Universal Credit. These are resourceswhich givendifferent circumstances could contribute to the supply of newhousing or additional social investment.

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(ii) RentPolicy

Southway has recently raised its social housing target rents to take account of the increased value of itsproperties following significant investment to achieveDecent Homes anddelivery of its transfer promises.January 1999 values have been restated and these have beenused to set the new target rents. This increasewill provide significant additional funds of approximately £1.5mover the four years toMarch 2018. Thesefundswill be used to support the build of newhomes for affordable rent.

Southway does not use tolerance in its social rents or currently use affordable rent conversions. TheSouthway Board has taken the view that it does notwish to use tolerance or conversions to support thefunding of newbuild developments. This policy position is based on the existing needwithin the Southwayandwider SouthManchester area. There is a shortage of lower cost affordable housing availablewith 56%of homes owner occupied, 23.5%privately rented and 20.5% social housing. In addition house prices aresignificantly higher than the citymedian leading to higher private sector and therefore affordable rents. Theonly realistic housing option that is available formany low income families is social housing and retainingthis is important so thatwe canprovide for those low income familieswhoworkwithin the Southway areasupporting its economybutwho are unable tomove into higher cost housing options.

Should it be necessary to fund future initiatives and further newbuildwork the strengthwithin our assetbase could be used to re-finance/borrowmore funds.

(iii) Income fromDisposals andRTBSales

Southway has anAcquisition andDisposal policy approvedby its Board in 2012.With the exception ofinvoluntary sales via the Right to Buy and the Right to Acquire, disposal of a property or groupof propertiesis consideredwhen:

- the property is of lowor nodemand- the cost of investing in the property is not beneficial, due to substantial investment needs- the property has no clear potential for future service delivery or strategic development purposes- the incomegenerated is not equivalent to thatwhich could be achievedby disposal and subsequentinvestment of the capital receipt

- the property is vacant and likely to remain vacant for the foreseeable future- the disposal of the propertymay allow for estate redesign and layout issues to be addressed.

Southway has previously disposed of two larger homes due to their high capital value and location outsideof Southway’s core neighbourhoods.TheTrustwill carry out option appraisals in similar circumstancesshould the opportunity arise. Sale proceedswill be used to support the funding of newbuild development.

A significant number of our tenants retain the preserved Right to Buy andwith the current level of discountswe are experiencing higher numbers of sales taking place. In 2013/14 therewere 49 sales generating netproceeds of £2.2m.These fundswill be reinvested in newhousing stock.

Southway homes are very popularwith a five yearwaiting list and a very low turnover (less than 5%annually). Homes have been improved to a high standard that exceedsDecent Homes and themajority arewithin neighbourhoods that are predominantly amix of social housing and ex RTB’s, are in good conditionand are very popular.

Given these circumstances Southway intends to principally sell properties onlywhere it has a RTB/RTAobligation. However, an exercisewill be carried out beforeMarch 2016 to assess the individual net value ofeach property andgroups of properties to resolve their optimumuse.

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(iv) StockConditionandStockRemodelling

In consultationwith our tenants Southway has set its own stock improvement standard that exceeds theGovernments decent homes target, providing homes that have goodquality internal fittings, arewind andweather tight and energy efficient. A range of product styles and choices are providedwith keyconsiderations being product durability and ease of use.

A stock condition surveywas completed in 2011. This showed that the choicesmade aboutwhatwork tocarry out and about the specifications andproducts had achieved significant benefits for our tenants. Savillsthe firmwhowere commissioned confirmed that“our overall impression gained fromour surveys is that thestock is in good condition andhas clearly benefitted from the significant investment programme that hastakenplace since transfer.”

The survey assisted us in business planning andplanning andprioritising investment needs until 2016 atwhich timewewill carry out a further stock survey. When looking at our repair andmaintenance standards,at the choicesweoffer to our tenants and identifying parts of our stock thatmay needmore significantinterventions than cyclicalmaintenance.

Most of our stock is popular and there have been limited instanceswhere significant intervention has beenneededdue to neighbourhood sustainability and our ability to let properties. Southway has previouslyconverted a block of six flats into two 4bedroomhomes. Thiswas due to significant anti social behaviorproblems thatwere exacerbatedby the flat designs, their lack of security and their location at the endof acul de sac. Where properties are difficult to let or do not fullymeet the needs of our existing tenantswecarry out option appraisals and look at the bestway to resolve this.

One area thatwas identified recentlywas an age restricted landlockedbungalow sitewhere turnoverwashigh and the propertieswere found to not be fit for purpose for their intended residents (older people).Selective demolition, regeneration andnewbuildwere the option chosen to address this issue and ensurelong term sustainability of the area, provide fit for purpose age friendly accommodation and stock viability.This projectwill commence in 2014/15.

Following the acquisition of a sheltered housing block in Chorlton, Southway has considered the bestmeans to remodel the scheme to improve the layout and condition of the properties and ensure that theymeet the needs of its residents.Workwill begin to convert bedsits to apartments and to improve thecommunal facilities and spaces in 2014/15.

Further details of the two remodelling projects are available on theTrust’swebsite.

(v)NewBuildDevelopment

Southway is investing significantly in newbuild development between 2014 and 2017.TheTrust recognisesthe need to achieve value formoney andmaximise the number of homes thatwebuildwhilstmaintainingquality. Early in 2014we carried out a reviewof the costs of a newbuild project undertaken using theprevious procurement framework andbenchmarked this against average costs being achieved throughselective tendering. As a result it was decided to develop our own select list of contractors and carry outcompetitive tendering for future projects to achieve better value formoney. A target has been set to achieve10-15%efficiencies through competitive tender anddesign consistency in 2014/15 against our previousnewbuild rates.

Alongside thisworkwehave looked at our design standards and specification to seewhether these areaffecting ourworks costs. A design guide has nowbeendrafted that sets out our aspirations aswell as theminimumstandards thatwewill seek to achieve and assists us understanding cost impacts of our designdecisions aswell as ensuring life time costs andoperational impacts are considered.

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(vi)DevelopmentAdministration

Southway has an internalworkforcemanaging its newbuild development programme. The teamof staffare supported by external specialists such as architects and aremonitored against a 5% fee target. During2014/15wewill carry out aVFM reviewof this fee, benchmarking our costs against others and look at howthe teamworks. Wewill look atwhether the team structure is set up right, at roles, responsibilities and skillsand is efficient and effective in its projectmanagement anddelivery.

Southway commissions a variety of specialists to support its newbuildwork; specifically architects andspecialist surveyors. A fee budget for all pre andpost contractwork has been set at 8%. Wewillmeasure theactual costs of the service during 2014/15, look at theways inwhichwe commission andworkwith ourconsultants and streamline ourworkwhere it is possible. Wewill then set targets for achieving efficiencies in2015/16.

9. Social InvestmentThere has been significant growth in the range and value of social investment projects thatwe aresupporting,many in response to the impacts of reductions in public sector funding that are affecting keycommunity services.This is at the same time as our tenants are facedwith higher cost food and energy andthe impacts ofWelfare Reformand lowerwages.

Our social investment activities are set out in one Plan thatwill enable us to provide greater transparencyregarding the activitieswe are undertaking, create efficiencies by combiningprojects that supportmorethan one objective, andprovide a consistentmethod for reporting onoutcomes and achievements to theBoard and to our tenants. In linewith Southway’s Futures Strategy andCorporate Plan, Social Investmentactivitieswill expand substantially in 2014/15.Thewide range of initiativeswill include:

• Events andprojects targeted at our older and younger tenants• Employment and training projects• Community Centre and volunteering projects• Environmental sustainability projects• Money advice for individualswithmental health needs• Promotion of credit union and small business loans

Each project is considered in terms of its Social Return on Investment via an economic benefitmodelwhichwas developedbyHACTwith funding fromSouthway and a small groupof other RPs. Additional details asto how theTrust assesses the benefits in this regard are available on theTrust’swebsite.

An example project is our Smart Energy servicewhere EnergyDoctors provide behavior change andsupplier switching advice to tenants to help them reduce their heating bills. In 2013/14 total savingsachievedwere £101k and the projectwonboth theNational Housing Federation’s NorthWest andnationwideCommunity Impact Award for promoting greener living.

To accompany the new communications approaches noted above, the coming yearwill also include agreater focus on improving digital access for Southway tenants. ADigital AccessOfficer has already beenappointed to helpwith delivery. Further information of theDigital Inclusion project is available on theTrust’swebsite.

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10. Objectives for 2014/15Southway is committed to continuous improvement in both services andongoing delivery of efficiencysavings. As noted earlier efficiencies of £554k have already been identified for 2014/15, equivalent to 4.9%ofthe operating cost base. In addition to these financial savings theTrust plans to fully assess a number of itsservices during 2014/15 to provide savings in future years. These include:

• The reviewof ServiceDeliveryModels and implementation of theTotalMobile IT system.

• Workforce reviews in IT andNeighbourhood Services.

• Major procurements relating to delivery of theDevelopment andAcquisition programme, of ourinsurance arrangements andof the repairs servicematerials contract.

• Promoting the use of digital access channels to access Southway services.

• Reviewof the rent payment service.

• Reviewof central and overhead costs, reflecting the need to adapt to newpriorities and service areas andthe finalisation of theHIP.

• Application of theHACT Social Return on Investmentmethodology to Southway projects.

Newarrangements are in place formonitoring the achievement of efficiency savings in 2014/15,which canbepassed on to tenants in due course.

Southwaywill be adopting a newCorporate Plan inMarch 2015.Thiswill include the setting of annualefficiency targets for each of the 3 years to 2018,whichwill set the framework for the reviewof theValue forMoney Strategy in 2015.

our Smart Energy service where Energy Doctorsprovide behavior change and supplier switchingadvice... won both the National Housing Federation’sNorth West and nationwide Community ImpactAward for promoting greener living

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Finance and Risk

This facility provides sufficient funds to meet stock condition needs throughout this period, fund adevelopment programme beyond the current 3 year plan, support the operating cost base and otherinvestment plans, and provide considerable buffer for risk.

Southway is currently reviewing its Futures Strategy corporate plan, and this may lead to a need foradditional funding. If so, Southway has considerable capacity both in terms of asset and interestcover. The terms of its current facility mean that any such additional funding is likely to attract ahigher cost for existing funds, and therefore any changes in this realm will follow a consideredanalysis of the added value to the community brought in from such extra cost.

In the period fromTransfer to 2014, Southway also benefitted from £37.3m of government GapFunding. In February 2014 the administering authority confirmed that Southway had met all theterms of that grant. All monies were received by March 2014, and no further monies are due.

Southway will continue to seek government development grants. This will enable the benefit of ourcurrent loan to be spread over a longer development programme.

1. Loan FacilitySouthway is funded in a manner which is standard for stock transfer landlords. A single loan facilityis in place, which is drawn on in an initial period of intense investment, and is then scheduled to berepaid against an agreed timetable.

Southway’s facility is provided by Barclays Bank plc. Borrowings peaked in March 2013 at £81m, andthis will be repaid in agreed annual installments in the 16 years to March 2029.

10

20

30

40

50

60

70

80

90

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Year

Business Plan 2014.15 - March Board

12.13 17.18 22.23 27.28

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2. Financial PerformanceThe position in each of the last five trading years is as follows:

Rents & other income 20.8 21.2 22.5 23.9 24.6

Gap Funding 7.8 4.2 6.2 7.4 5.9

INCOME 28.6 25.4 28.7 31.3 30.5

Stock Investment 27.7 24.7 22.2 31.8 11.0(Revenue and Capital Spend)

Other Costs 10.5 11.1 9.7 11.1 11.7

OUTLAY 38.2 35.8 31.9 42.9 22.7

NETOPERATINGRESOURCE (9.6) (10.4) (3.2) (11.6) 7.8

Sales Surplus 0.5 0.3 0.6 0.6 1.6

Net Interest (1.4) (2.0) (2.7) (3.3) (3.8)

NETRESOURCE (10.5) (12.1) (5.3) ( 14.3) 5.6

The table provides outcomes on an accruals basis. It includes investment in the current properties (and relatedincome) irrespective of accounting treatment, but ignores the cost (depreciation) of past investmentThis disclosure therefore aligns with EBITDA(MRI), the interest cover covenant applied by the funderfrom 13/14 onwards.

2009/10£m

2010/11£m

2011/12£m

2012/13£m

2013/14£m

In the period fromTransfer (November 2007) to March 2013, Southway’s Business Plan and fundingassumed that there would be a net outflow of cash resources in each year. This position reversed in2013/14, and surpluses are expected to continue in future years. The excess resources will primarily beused to fund new properties and to repay debt.

The pattern of sales surpluses reflects the decline in market conditions, and then, from 2012/13, thehigher discounts imposed by statute available to tenants. The sales have been nearly all pursuant totenants’ statutory right-to-buy. Southway has no immediate plans to dispose of any of its properties,and there is no reliance on future sales in the Business Plan beyond 2015/16.

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3. Financial ManagementSouthway operates to a financial management regime which ensures that strategy is set andmonitored by the Board and its committees. It takes account of the terms of the loan contract.

• The Business Plan is reviewed annually, and in the context of Southway’s diversifying offer toits communities. The review assesses compliance with future financial commitments, and alsothe potential for future funding needs. It includes the results of a range of stress tests. Risks are lookedat both in isolation (to establish the greatest vulnerabilities), and then as part of scenarios wheremultiple risk factors might impact the Plan.

• Medium term Resource Plans are agreed annually to resolve how resources will be deployed over a3 year time span, taking account of any constraints from the loan agreement. The Plan identifiesamounts available to fund the preferred operating cost base, and the diverse investment needs of thebusiness (see above).

• Four times in each year the Performance & Resources Committee receives reports which set outactual income and expenditure against the current Resource Plan. Differences are analysed to ensurethat variances due to timing differences are distinguished frommore substantive differences.

• High level financial and performance indicators are assessed by the Board quarterly.

The current Loan Agreement requires that earnings in each year from 2013/14 onwards [as defined byEBITDA (MRI)] must cover interest cost by 110%. Projections, including those from stress testing,indicate that this rule will be met safely in all years. Even where all tested adverse risks were tocombine in all future years, this covenant would not breach before 2027.

The Loan Agreement also requires repayment of debt on a strict schedule. Stress testing of the Plantherefore assesses the impact on Southway’s capacity to adhere to this. Assessments of stresses incombination indicate that the risk of non-adherence over the next 24 months is remote, and evenafter that point there is good headroom. The impending review of the Trust’s Futures Strategy willre-examine these risks and their impact on the current funding structure, and on any potentialreplacement.

Prior to 2013/14, a separate covenant was set limiting net cash payments in any year. This covenanthas been met in all of those years. In 2012/13 Southway acted to maximise the use of this permittedcapacity, and this is reflected in the low level of current liabilities showing in the balance sheets ofthat comparative year.

Controls were also exercised via the Gap Funding mechanism. The HCAmonitored performance byreference to Milestones achieved against Milestones agreed at the start of each year. A Milestone is asingle component renewal within a property.

The Social Housing Regulator reviews financial viability annually, and publishes its findings tostakeholders.

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4. Valuation, Asset Cover and LiquidityThe transfer properties were last valued at March 2013, by Mazars LLP. This was a desktop revaluationof the 2012 full valuation. The outcomes compared to those at Transfer (2007) were:

Nov 2007at transfer

March 2013

Transfer Property Numbers 5,941 5,868

Existing Use Value for Social Housing £15m £148m

Existing Use Value for Social Housing £124m £176mwith sales of vacant units

Vacant Possession Value £720m £631m

Since Transfer in 2007, there have been two key drivers of change in values. The delivery of theHome Improvement Programme has pushed values higher, but the weakening of open marketproperty values has had the opposite effect. The three measures of valuation above have beenimpacted differently in accordance with the varying ways to which these two issues are factored intothe assessment.

The cover required for the Barclays’ loan facility is 100% of the Existing Use Value for Social Housing.The position at March 2013 gave an asset cover ratio of 183%, since when debt has fallen. Southwaytherefore opted not to formally test this ratio at March 2014.

5. Treasury StrategyAs a debt funded business, Southway recognises an inherent risk arising from uncertain interest rates.It seeks to strategically manage the risk through a heavy weighting to fixed rate finance. To 9 August2013, this was achieved through a range of fixed tranches with varying maturity dates and rates(4.22% - 5.24%). From that date, these were consolidated into a single amortising fix such that theamount will always be 90% of the unrepaid facility. This was priced at that date at 5.07%, being thefair equivalent of the various tranches it had replaced.

The balance of the reducing facility would be drawn at the prevailing LIBOR. That part of the facility isrevolving which enables cash to be drawn and repaid at 48 hours notice.

At 31 March 2014 had debt of £67.7m (2013: £81.0m). All of the 2014 year-end debt was on theamortising fixed facility. Southway does not contract for derivative instruments outside of its loancontract.

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6. Management of RiskSouthway continuously assesses the changing pattern of risk in the context of an evolving corporatestrategy. In particular due regard has been made to the changing economic environment since 2008,and developments in government policy, particularly over rents and welfare reform. It also addressesthe new risks taken on as it widens its offer to the community, particularly over partnering oncommunity facilities and in the provision of new homes.

The principle financial risks faced by the business, as identified in the Significant Risk Register, are:

(1)Welfare reform reducing Southway’s income and damaging its reputation with customers

(2) loss of resources from the increased discounts imposed for Right-to Buy sales

(3) delays in delivery of new homes

(4) increasing costs within the construction sector

In general, Southway manages these risks by the adoption of prudent strategies within businessplanning and budgeting, maximising the capacity of the business to withstand shocks. In particular,its assessment of capacity to meet obligations under the current loan agreement:

(a) places no reliance on any property sales after 2015/16

(b) has fixed the majority of its debt, and has a long term LIBOR (interest rate) assumption on theremainder of 4% real (6.5% actual)

(c) has provisions for annual operating costs that are well above those affordable within the 110%EBITDA(MRI) constraint. Currently no year is forecast to have an outcome on this measureof less than 200%.

(d)makes provision for bad debts well above the consistent outturn performance. The allowance is4% in 2014/15 and 6% thereafter. Performance in 2013/14 was 1.3% (2012/13: 0.4%). The increasedprovisions reflect the increasing risk from government welfare reforms.

Southway is also aware of the inherent riskof pension provision, particularly definedbenefit schemes. Business planningmodels have been tested successfully forthe strain of likely increases in employercontributions. Southway faces only limitedrisk from auto-enrolment as there isalready a high take-up (around 75%) andit provides in budgets for an increase inthis factor. Southway participates in thedefined benefit Greater ManchesterPension Scheme, and the definedcontribution NEST scheme. Southwaydoes not participate in the Social HousingPension Scheme (SHPS). Fun and Feedback Events

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Southway Housing Trust (Manchester) Limited (‘Southway’or ‘the Trust’) is an Industrial and ProvidentSociety and a Registered Provider with the Homes & Communities Agency (HCA).

It is governed by a voluntary board. It commenced trading on 26 November 2007, following thetransfer to it of Manchester City Council’s stock in the areas of Burnage, Chorlton, Old Moat,Withington and Didsbury. Its principal activities are the management, maintenance and developmentof housing, and the provision of related community services, within those areas.

Southway’s vision is to work in partnership to make south Manchester a place that people are proudof – a safe place where people choose to live, work and play. It has clear objectives within that vision,and delivers it through annual corporate plans which evolve to meet changing needs and Southway’sincreasing financial strength.

1. Board Members and Executive TeamThe Board Members and executive directors who have served Southway during the year and to thedate of this report are set out at the front of this document. The Board includes members who aretenants of the Trust, nominees of Manchester City Council and members of the local community. TheMembers bring a wide range of commercial expertise and local knowledge to Southway’sgovernance.

Board Members receive no remuneration other than reimbursement of expenses.

The Shareholders of the Trust are the independent and tenant Board Members, and Manchester CityCouncil. The Trust is constituted such that no dividend or other financial distribution to Members isever made.

Board Members conduct their affairs within an agreed Code of Conduct, which complies with allregulatory requirements. Each Member of the Board signs a Statement agreeing to adhere to theCode.

The Board has in place a Probity Statement which sets out the standards of conduct it places on itselfand those working for Southway. The statement also addresses the potential for conflicts of interest.

The executive directors are the Chief Executive and the other members of Southway’s ExecutiveLeadership Team (ELT). They hold no interest in Southway shares and act as executives within theauthority delegated by the Board. None of the executive directors are members of the Board, but theyattend all of its meetings. All members of ELT served throughout the year.

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The Chief Executive and other members of ELT are engaged on permanent service contracts. Theyreceive salaries set by the Board based on its estimation of the amounts required to secure theservices of appropriate personnel. The Board takes independent advice on this.

Where they choose to become schememembers, ELT members also benefit from contributions madeby Southway to the pension scheme. The scheme available to them is the Greater Manchester LocalGovernment Fund, and ELT members participate on the same terms as all other Southway employees.

Southway’s insurance policies indemnify board members and officers against liability whenacting for the Trust.

2. Charities CommissionThe Board confirm that they have referred to the guidance contained in the Charity Commission’sgeneral guidance on public benefit when reviewing the Trust's aims and objectives and in planningfuture activities.

3. Code of GovernanceSouthway complies with the principal recommendations of the NHF Code of Governance (revised2010). From September 2014 Southway will carry out an annual internal review of its compliance withthe Code.

The Board designs and follows a development plan, which is regularly reviewed. All Members carryout self-appraisals, and commission training as required.

Southway has gained accreditation by the Centre for Partnerships in respect of their GovernanceStandard.

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4. Regulatory StandardsThe Board is subject to, and an enforcer of, regulatory standards. In April 2012 the RegulationCommittee of the Homes and Communities Agency issued new standards.

The Board accepted the enhanced co-regulatory role demanded of it, and strengthened its approachin response. This includes frequent reviews of its role and delegations to committees and officers.

The Board’s Audit and Risk Committee carries out an annual review of its compliance with theStandards. The last review (July 2014) concluded that compliance had been achieved in all significantrespects, and agreed a programme for securing even greater compliance.

The Regulation Committee of the Homes and Communities Agency (the Regulator) issues RegulatoryJudgements on Registered Providers, and reported on Southway in 2014. It was graded for Viability atV1 and for Governance at G1, in each case this being the highest grade available. The viability gradingwas an improvement on those of past years, which had been V2.

In February 2014, The Regulator issued cautionary advice to the sector following its national review ofRPs’ compliance with the Value for Money Standard. Southway is seeking to now strengthen itscompliance with the Standard in all future years.

5. Residents’ Consultative GroupSouthway’s Resident Consultative Group (RCG) is made up of representatives of tenants and residentwithin the Trust’s area of operation. The Board consults the Group on a range of policies andoperational practices. The Group monitors Southway’s performance against service standards andperformance targets. The Group meets every 6 weeks during the year.

The Members of Southway’s Board who are tenants of the Trust attend meetings of the RCG as non-voting observers.

The group is informed through a range options for involvement which are set out in the Trust’sCustomer Involvement Strategy. This Strategy aims to maximise the level of input and influence fromtenants by offering a range of differing levels and means of engagement.

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6. Tenant ScrutinySouthway established a Tenant Scrutiny Panel in 2012. The Panel reports its findings to the Audit &Risk Committee, and a programme of action is agreed and implementation monitored. The Panelreports annually to the Board. The Panel selects its own areas of enquiry. All Panel members receiveappropriate training, and can commission independent expert advice if they require. The Panelreceives full administrative support.

During 2013/14 the Panel carried out two reviews – into Southway’s handling of complaints, and intothe out-of-hours repairs service.

7. EmployeesSouthway employed an average of 199 employees in 2013/14 (2012/13 : 199) to deliver its services.These numbers now include employees on variable hours contracts.

All employees are made aware of the organisation’s aims and objectives and are supported in thedelivery of their roles as part of the Everyone Matters framework. This sets out standards, behavioursand guidance which all staff must observe.

Southway shares information with employees through monthly briefs and teammeetings, andthrough postings on the staff intranet. It also operates a Staff Consultative Group of employeerepresentatives which meets monthly to discuss matters in depth which affect employees.

Staff adhere to a Code of Conduct, (which was fully revised and updated in May 2013) and eachemployee signs to their agreement with such.

Staffing practices are conducted through a range of policies which have been set by the Board, andare available to all employees. Southway is committed to equal opportunities. It supports theemployment of disabled people, both in recruitment and in the retention of employees who becomedisabled whilst in the employment of the Trust.

The second bi-annual staff satisfaction survey carried out in autumn 2012 showed increased levels ofsatisfaction amongst staff with significant increases across the majority of areas. Overall satisfactionincreased from 50% in 2010 to 77% in 2012 placing Southway as above average when compared tothe other providers. A further survey will be carried out in autumn 2014.

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8. Health and SafetyThe Board is aware of its responsibilities on all matters relating to health and safety. Southway hasprepared detailed health and safety policies and provides staff training and education on health andsafety matters. The Policy, and compliance with its requirements, was fully reviewed in 2012/13following the appointment of a new specialist advisor.

A Health and Safety Group operates which contains a range of staff representatives, and monitors theoperations of the Trust with a view to ensuring that they meet standards in this respect.

9. Statement of the Responsibilities of the Board forthe Report and Financial StatementsThe Board is responsible for preparing the report and financial statements in accordance withapplicable law and regulations.

The Co-operative and Community Benefit Societies Act 2014 requires the board to prepare financialstatements for each financial year. Under that law the Board have elected to prepare the financialstatements in accordance with United Kingdom Generally Accepted Accounting Practice (UnitedKingdom Accounting Standards and applicable laws). Under the Co-operative and CommunityBenefit Societies Act the Board must not approve the financial statements unless they are satisfiedthat they give a true and fair viewof the state of affairs and surplus or deficit of theTrust for that period.

In preparing these financial statements, the board is required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards and the Statement of Recommended Practice(SORP) Accounting by Registered Housing Providers Update 2010, have been followed, subject to anymaterial departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presumethat the Trust will continue in business.

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The Board is responsible for keeping proper accounting records which disclose with reasonableaccuracy at any time the financial position of the Trust and enable it to ensure that the financialstatements comply with the Co-operative and Community Benefit Societies Act 2014, the Housingand Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of SocialHousing 2012. It is also responsible for safeguarding the assets of the Trust and hence for takingreasonable steps for the prevention and detection of fraud and other irregularities.

In so far as each of the Board Members is aware:

• there is no relevant audit information of which the Trust’s auditors are unaware; and• Board Members have taken all steps that they ought to have taken to make themselves aware ofany relevant information and to establish that the auditors are aware of that information.

The Board is responsible for the maintenance and integrity of the corporate and financial informationincluded on the Trust's website. Legislation in the United Kingdom governing the preparation anddissemination of financial statements may differ from legislation in other jurisdictions.

10. Board Statement on Internal ControlSouthway manages its operations through a considered development of internal control systems.The Board has ultimate responsibility for these systems and the meeting of control objectives, andoperates a constant dialogue with those to whom it delegates the practical task of designing,operating and assessing such systems.

The systems are designed to ensure that policies are carried out, service standards are monitored, andthat assets are applied to their intended purpose. The system of internal control is designed tomanage, rather than eliminate, the risk of failure to achieve business objectives, and to providereasonable, and not absolute, assurance against material misstatement or loss.

Since transfer in 2007 the Board has undertaken a process of ensuring that operations are carried outin an integral fashion to meet the Board’s own devised policies and objectives. Where this processidentifies certain weaknesses in operations, strategies are put in place to improve the control systems.

Key elements of the control framework both in operation and under review are;Community Commitment - Didsbury

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(a) The Board carried out an independent Governance Review in 2011, the action plan from whichwas delivered during 2012/13.

(b) Board assesses its compliance with regulatory standards on an annual basis.

(c) A full scheme of delegations exists via formal Standing Orders, and these are frequently reviewed.

(d) A clear business planning strategy, which is subject to overall review by May of each year.

(e) A process of budget setting by Board, and monitoring by Performance & Resources Committee,which is firmly embedded in the business planning process, with measures of outcome for bothmainstream operations and the Home Improvement Programme, each designed to identify thespecific variances that arise from their respective risks.

(f) A clearly laid down detailed Futures Corporate Plan through which the Board defines the tasksneeded to achieve objectives, and monitors their fulfillment. This was reviewed and reset in May 2014.

(g) A system of key performance indicators (KPIs) which are tied to pre-stated business objectives andcompared to pre-agreed benchmarks. These KPIs were fully reviewed by the Boardin March 2014.

(h) The operation of a dynamic Significant Risk Register and Team Risk Registers. Significant Risks arereviewed by the Executive Team Risk Panel on a quarterly basis, and by Audit & Risk Committee everysix months. The Register details the actions taken to manage each risk, and details of proposedfurther actions.

(i) An annual compliance review of the loan agreement.

(j) A comprehensive set of operating policies disseminated to staff, with a laid out timetable for theirreview at appropriate intervals. These policies include counter- fraud measures (prevention, detectionand reporting of discovered fraud, and strategies for ‘whistleblowing’).

(k) A fully considered treasury strategy which is reviewed every six months and on which thePerformance & Resources Committee receives advice direct from both its Director of Finance andspecialist external advisers. The strategy derives from a recognition of conflicting interest rate risksand the uncertainty of cash flow forecasts. Issues of counterparty risk are addressed.

(l) Formal recruitment policies, and both a programme of systematic performance appraisal of all staff,and a Learning and Development Plan, each constructed around objectives in theFutures Strategy.

(m) A formal Development Appraisal Procedure which sets a clear timetable for each project relatingto property development and land acquisition and outlines the risks associated and the controls inplace to mitigate those risks.

Within its ultimate responsibility for internal control systems, the Board has delegated authority to theAudit & Risk Committee to regularly review the effectiveness of the system of internal control. Thisincludes their establishment of a risk-based programme of internal audit reviews carried out by anindependent firm appointed by the Board, and conducted pursuant to the Board’s Audit Policy. TheCommittee reports quarterly to the Board.

The Audit and Risk Committee has received the Executive Leadership Team’s Annual Review of theEffectiveness of the System of Internal Control, and the Annual Report of the Internal Auditor, and has

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reported its findings to the Board.

The process for identifying, evaluating and managing the significant risks faced by Southway isongoing, and has been in place throughout the year ended 31 March 2014 and up to the date ofapproval of the report and financial statements.

Fraud and Gift Registers are maintained and are reviewed regularly. Southway has policies for theprevention of fraud, and for the action to be taken in the case of detection of fraud.

11. DonationsDuring the year donations were made to a range of local charitable and community groups, and alsoas small tokens of respect in the event of the bereavement or serious illness of a party connected toSouthway. The total of such donations was £3,230 (2013 £1,805).

12. Post balance sheet eventsNo events since the year-end have had a significant effect on the Trust’s financial position

13. Going ConcernAfter making enquiries, the Board has a reasonable expectation that the Trust has adequate resourcesto continue in operational existence for the foreseeable future, being a period of twelve months afterthe date on which the report and financial statements are signed. For this reason, it continues toadopt the going concern basis in the financial statements.

In reaching this view the Board has fully appraised the changing business environment facingSouthway, and assessed the strategic risks faced and the means available to it to mitigate these risks.

14. Statement of ComplianceThis Report of the Board includes an Operating and Business Review, and complies with the principlesset out for such in the SORP 2010.

15. External AuditorsA resolution to re-appoint Grant Thornton UK LLP will be proposed at the forthcoming annual generalmeeting.

16. Annual General MeetingThe annual general meeting will be held on 23 September 2014.

The Report of the Board was approved by the Board on 15 September 2014 and signed on its behalfby:

Emma RichmanChair of the Board

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We have audited the financial statements of Southway Housing Trust (Manchester) Limitedfor the year ended 31 March 2014 which comprise the income and expenditure account,statement of total recognised surpluses and deficits, reconciliation of movements in theTrust's funds, balance sheet, cash flow statement and the related notes. The financialreporting framework that has been applied in their preparation is applicable law and UnitedKingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the society's members, as a body, in accordance with regulationsmade under Section 87 of the Co-operative and Community Benefit Societies Act 2014.Our audit work has been undertaken so that we might state to the society's members thosematters 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 anyoneother than the society and the society's members as a body, for our audit work, for this report,or for the opinions we have formed.

Respective responsibilities of the board and the auditor

As explained more fully in the Statement of Board's Responsibilities set out on pages 40 to 41,the board is responsible for the preparation of financial statements which give a true and fairview. Our responsibility is to audit and express an opinion on the financial statements inaccordance with applicable law and International Standards on Auditing (UK and Ireland).Those standards require us to comply with the Auditing Practices Board's Ethical Standardsfor Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the FinancialReporting Council's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the society's affairs as at 31 March 2014 and of itsincome and expenditure for the year then ended;

• have been properly prepared in accordance with the Co-operative and Community BenefitSocieties Act 2014, the Housing and Regeneration Act 2008, and the Accounting Direction forPrivate Registered Providers of Social Housing 2012.

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Independent auditor's report to themembers of Southway Housing Trust(Manchester) Limited

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Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Co-operative andCommunity Benefit Societies Act 2014 requires us to report to you if, in our opinion:

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

Grant Thornton UK LLP

Statutory Auditor, Chartered AccountantsManchester23 September 2014

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The notes on pages 50 to 71 form part of these financial statements.

Historical cost surpluses anddeficitswere identical to those shown in the income and expenditure account.

The financial statementswere approvedby the Board on 15 September 2014 and signedon its behalf by:

EmmaRichman Iain Leviston KarenMitchellChair of the Board BoardMember Chief Executive

Income and Expenditure AccountFor the year to 31 March 2014

•

£’000 £’000

Turnover: continuing activities 3 25,806 25,526

Operating costs: continuing activities 3 (20,495) (30,844)

Operating surplus/(deficit) continuing activities 3 5,311 (5,318)

Surpluson saleof fixedassets:housing properties 6 1,647 636

Interest receivable andother income 7 34 75

Interest payable and similar charges 8 (3,880) (3,344)

Surplus/(deficit) for theyear 20 3,112 (7,951)

Note 2014 2012

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Statement of Total RecognisedSurpluses and DeficitsFor the year to 31 March 2014

£’000 £’000

Surplus/(deficit) for the year 3,112 (7,951)

Actuarial gain/(loss) relating to pension scheme 28 2,268 (1,443)

Total recognised surplus/(deficit) for theyear 5,380 (9,394)

Note 2014 2013

Reconciliation of movements in the Trust's fundsFor the year to 31 March 2014

£’000 £’000

Opening funds 18,857 28,251

Total recognised surplus/(deficit) for the year 5,380 (9,394)

Closing total funds 24,237 18,857

2014 2013

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Balance SheetFor the year to 31 March 2014

£’000 £’000

Fixed assetsHousing properties 11 87,777 87,340Other tangible fixed assets 12 718 559

88,495 87,899Current assetsStock of materials 13 94 69Debtors 14 3,175 16,329Cash at bank and in hand 7,778 4,729

11,047 21,127Creditors: amounts falling due within one year 15 (5,173) (2,973)

Net current assets 5,874 18,154

Total assets less current liabilities 94,369 106,053

Creditors: amounts falling due after one year 17 65,017 80,337Net Pension Liability 28 5,115 6,859

70,132 87,196Capital and reservesNon-equity share capital 19 - -Reserves 20 24,237 18,857Trust's funds 24,237 18,857

94,369 106,053

Note 2014 2013


The financial statementswere approvedby the Board on 15 September 2014 and signedon its behalf by:

EmmaRichman Iain Leviston KarenMitchellChair of the Board BoardMember Chief Executive

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Cash Flow StatementFor the year to 31 March 2014

£’000 £’000 £’000 £’000

Net cash inflow/(outflow) fromoperatingactivities 24 15,810 (6,610)

Returnson investmentsand servicingof financeInterest received 34 75Interest paid (3,689) (3,158)

(3,655) (3,083)Capital expenditurePurchase, improvement andconstruction of housing properties (8,711) (19,147)Gap Funding received 11,036 2,192Other capital grant received 92 294Purchase of other fixed assets (479) (360)Sale of housing properties 2,222 912

4,160 (16,109)Cash inflow / (outflow)beforeuseofliquid resources& financing 16,315 (25,802)

Managementof liquidresourcesCash transferred frommoneymarket deposit accounts - 8,648

FinancingLoans (repaid)/received (13,266) 21,000

Increase in cash 25 3,049 3,846

Note 2014 2013


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1. Legal Status

The Trust is registered under the Industrial and Provident Societies Act 1965 and is registered with theHomes and Communities Agency (HCA) as a housing provider.

2. Accounting Policies

(a) Basis of accounting

The Financial Statements are prepared in accordance with UK Generally Accepted AccountingPrinciples (UK GAAP) and the Statement of Recommended Practice: Accounting by Registered SocialProviders Update 2010 (SORP) and comply with the Accounting Direction for Private RegisteredProviders of Social Housing 2012.

(b) Going Concern

The Trust’s business activities, its current financial position and factors likely to affect its futuredevelopment are set out within the Report of the Board and the Operating and Financial review. TheTrust has in place long term debt facilities which provide adequate resources to finance committedreinvestment and development programmes, along with the Trust’s day to day operations. The Trustalso has a long term business plan which shows that its is able to service these debts facilities whilecontinuing to comply with lenders’ covenants.

On this basis, the Board has a reasonable expectation that the Trust has adequate resources tocontinue in operational existence for the foreseeable future, being a period of at least twelve monthsafter the date on which the report and financial statements are signed. For this reason, it continues toadopt the going concern basis in the financial statements.

(c) Turnover and revenue recognition

Turnover compromises rental income receivable in the year, other services supplied in the year at theinvoiced value (excluding VAT where recoverable), and revenue grants receivable in the year.

Rental income is recognised from the point when properties under development reach practicalcompletion or otherwise become available for letting. Revenue grants are receivable when theconditions for receipt of agreed grant funding have been met. Charges for support services fundedunder Supporting People are recognised as they fall due under the contractual arrangements withAdministering Authorities.

(d) Corporation Taxation

The Trust has charitable status. The directors do not consider any of the Trust’s activities to be subjectto Corporation Tax.

(e) Value Added Tax (VAT)

The Trust charges VAT on some of its income and is able to recover part of the VAT it incurs onexpenditure. VAT incurred which is not recoverable is included within these financial statementswithin the cost to which it relates. The balance of VAT payable or recoverable at the period-end isincluded as a current liability or asset.

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(f) Housing Properties

Housing properties are principally properties available for rent and are stated at cost lessdepreciation. In accordance with the requirements of the SORP, transferred properties were initiallyincluded at Existing Use Value (Social Housing) at the date of transfer.

Works to existing properties which replace a component that has been treated separately fordepreciation purposes, along with those works that result in an increase in net rental income over thelives of the properties, thereby enhancing the economic benefits of the assets, are capitalised asimprovements.

(g) Gap Funding

Gap Funding is received from the Homes and Communities Agency in respect of a proportion of theexpenditure incurred by Southway to repair and improve its properties. Such funding is accounted forby reference to the accounting treatment of the actual costs so funded, and in direct proportionthereto. The funding of revenue costs is regarded as revenue income within Turnover, and the fundingof capitalised additions to Housing Properties shown as a deduction from the cost of housingproperties on the Balance Sheet.

(h) Social housing grant

Social housing grant (SHG) is receivable from the Homes and Communities Agency (the HCA) and isutilised to reduce the capital costs of housing properties, including land costs. It is allocated to theland and structure components in proportion to their cost. Grant receivable in respect of identifiablecomponents is allocated to those components.

SHG due from the HCA or received in advance is included as a current asset or liability. SHG receivedin respect of revenue expenditure is credited to the income and expenditure account in the sameperiod as the expenditure to which it relates.

SHG is subordinated to the repayment of loans by agreement with the HCA. SHG released on sale of aproperty may be repayable but is normally available to be recycled and is credited to a RecycledCapital Grant Fund and included in the balance sheet in creditors.

Where individual components are disposed of and this does not create a relevant event for recyclingpurposes, any grant which has been allocated to the component is released to the income andexpenditure account. Upon disposal of the associated property, the group is required to recycle theseproceeds, as such a contingent liability is disclosed to reflect this.

(i) Other grants

Other grants are receivable from local authorities and other organisations. Capital grants are utilisedto reduce the capital costs of housing properties, including land costs. Grants in respect of revenueexpenditure are credited to the income and expenditure account in the same period as theexpenditure to which they relate.

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(j) Development Agreement

Southway performs its Home Improvement Programme under a Development Contract withManchester City Council. Under this contract the value of the housing properties paid by Southway toManchester City Council at the time of acquisition was deemed to be equal to the income paid inadvance by Manchester City Council to Southway in respect of that contract of works. Under FRS 5,the substance of these transactions is regarded as being one single transaction with a nil effect.Further details are given at Note 30.

(k) Depreciation – Housing Properties

The Trust separately identifies the major components which comprise its housing properties, andcharges depreciation, so as to write down the cost of each component to its estimated residual value,on a straight line basis, over its expected useful economic life shown below.

Where Grant Funding, SHG or other grants have been allocated to a component, the depreciableamount is arrived at on the basis of original cost, less the proportion of the grants attributable to thecomponent, less residual value.

Component Useful Economic Life

Freehold land Not depreciated.

kitchens 20 years

bathrooms 30 years

doors andwindows 30 years

heating system 15 years

electrical system and lifts 30 years

cladding - non traditional properties 30 years

roofs and chimneys 50 years

off road parking - tarmac/paved drives 10 to 30 years

structure - traditional build properties 80 years

structure - non traditional properties 30 years

(l) Impairment

Housing properties, including those with individual components which are depreciated over a periodin excess of 50 years are subject to annual impairment reviews. Other assets are reviewed forimpairment if there is an indication that impairment may have occurred.

Where there is evidence of impairment, fixed assets are written down to their recoverable amount,being the higher of the net realisable value or the value in use to the Trust. Any such write down ischarged to operating surplus.

(m) Depreciation – other tangible fixed assets

Depreciation of other fixed assets is provided so as to write them down to their estimated residualvalues over their expected useful lives on a straight-line basis. The assumed useful lives ofother assets are:

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Asset Useful Economic Life

Freehold Land Not depreciated

Freehold buildings 50 years

Long leasehold property Over life of lease

Community Centre (structure) 80 years

Furniture, fixtures and fittings 7 years

Computers and related equipment 3 years

Commercial vehicles 4 years

(n) Pensions

The Trust participates in the Greater Manchester Pension Fund, part of the Local GovernmentPension Scheme.

The operating costs of providing retirement benefits to participating employees are recognised in theaccounting periods in which the benefits are earned. The related finance costs, expected return onassets and any other changes in fair value of the assets and liabilities, are recognised in theaccounting period in which they arise. The operating costs, finance costs and expected return onassets are recognised in the income and expenditure account with any other changes in fair value ofassets and liabilities being recognised in the statement of total recognised surpluses and deficits.

Pension scheme assets are measured at fair value. Scheme liabilities are measured on an actuarialbasis using the projected unit method and are discounted at appropriate high quality corporate bondrates. The net surplus or deficit, adjusted for deferred tax, is presented separately from other netassets on the balance sheet.

The current service cost and costs from settlements and curtailments are charged against operatingsurplus. Past service costs are spread over the period until the benefit increases vest. Interest on thescheme liabilities and the expected return on scheme assets are included net in other finance costs.Actuarial gains and losses are reported in the statement of total recognised surpluses and deficits.

(o) Supporting people

Charges for support services funded under Supporting People are recognised as they fall due underthe contractual arrangements with administering authorities.

(p) Leased assets

Rentals payable under operating leases are charged to the income and expenditure account on astraight-line basis over the lease term.

(q) Liquid resources

Liquid resources are readily disposable current asset investments. They include somemoney marketdeposits, held for more than 24 hours, that can only be withdrawn without penalty on maturity or bygiving notice of more than one working day.

(r) Interest Payable

Interest payable is charged to the income and expenditure account in the period in which it falls due.

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(s) Amortisation of Loan Issue Costs

Loan issue costs are capitalised and written off over the term of the loan.

(t) Rental Arrears

Arrears of rent are carried on the Balance Sheet at estimated realisable value. Reductions in estimatedrealisable value occurring since trading and operations commenced are written off to OperatingSurplus and treated as a normal cost of Bad Debts.

Social housing lettings 25,801 (19,607) 6,194

Other social housingactivitiesSocial Investment 5 (628) (623)Financial Inclusion - (260) (260)

25,806 (20,495) 5,311

Turnover£’000

Operating Costs£’000

Operating Surplus£’000

Social housing lettings 25,501 (30,064) (4,563)

Other social housingactivitiesSocial Investment 25 (600) (575)Financial Inclusion - (180) (180)

25,526 (30,844) (5,318)

Turnover£’000

Operating Costs£’000

Operating Deficit£’000

3. Turnover, Operating Cost and Operating Surplus

Continuing activities

2013 Restated*

*A revised categorision of expenditure has been adopted to separately identify spending inSocial Investment and Financial Inclusion activities. The 2012/13 comparatives have beenrestated to reflect this. There is no change to total turnover, operating costs or operating deficitto that previously reported.

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Rent receivable net of identifiable service charges 24,449 23,718Service income 132 122Net rental income 24,581 23,840

Gap Funding revenue grant 1,176 1,621Other revenue grants 19 19Other Income 25 21Turnover from social housing lettings 25,801 25,501

Management (5,963) (5,844)

Services (191) (182)

Routinemaintenance (2,585) (2,454)

Plannedmaintenance (1,163) (1,498)

Major repairs expenditure (5,948) (16,170)

Baddebts (329) (107)

Depreciation of housing properties (2,925) (3,540)

Other expenditure (503) (269)

Operating costs on social housing lettings (19,607) (30,064)

Operating surplus/(deficit) on social housing lettings 6,194 (4,563)

Void losses 134 140

2014£’000

2013Restated*£’000

3. Turnover, operating cost and operating surplus (continued)

Included within Major Repairs is environmental improvement expenditure of £3.4m (2013: £13.3m).

*The 2012/13 comparatives have been restated to reflect the revised categorision of income andexpenditure adopted in 2013/14. There is no change to total turnover, operating costs or operatingdeficit to that previously reported.

2013

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2014 No. 2013 No.

General housing 5,793 5,842

Supported housing and housing for older people 41 41

Affordable Housing 44 18

Total owned and managed 5,878 5,901

Depreciation of housing properties 2,925 3,540

Depreciation of other tangible fixed assets 320 338

Operating lease rentals- office accommodation 266 324- maintenance vehicles 191 206- office equipment 13 12

External auditor’s remuneration (excluding VAT)- for audit services 21 21- for non-audit services - -

Internal auditor’s remuneration (excluding VAT) 24 21

2014£’000

2013£’000

4. Accommodation in management

At the end of the year accommodation in management for each class of accommodationwas as follows:

Social housing owned andmanaged

In addition the Trust managed 269 leasehold properties (2013: 267)

5. Operating Surplus/(deficit)

This is arrived at after charging:

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57

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448

4200

Disposal Proceeds 2,805 1,196

Carrying value of fixed assets (575) (276)

Other costs of sale (583) (284)

1,647 636

2014£’000

2013£’000

Interest receivable 34 75

2014£’000

2013£’000

Loans and bank overdrafts 3,681 3,150

Amortisation of initial loan costs 30 107

Other finance costs 169 87

3,880 3,344

2014£’000

2013£’000

6. Surplus on sale of fixed assets - housing properties

7. Interest receivable and other income

8. Interest payable and similar charges

2013

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58

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2014 No. 2013 No.

Wages and salaries 6,067 6,053Social security costs 491 501Other pension costs 1,142 1,004

7,700 7,558

Administration 55 50Maintenance Service & Home Improvement 85 87Neighbourhood Services & Community Involvement 39 35Call centre 15 15Development and Property Acquisition 5 -

199 187

Averagemonthly number of employees expressedin full time equivalents

Employee costs 2014£’000

2013£’000

Chief Executive 123 113Director of Finance & Resources 89 92Director of Neighbourhood Services 95 89Director of Asset Management & Regeneration 95 89

402 383

The emoluments of thehighest paiddirector, theChief Executive, excludingpension contributions,were£104k (2013: £96k).TheDirector of Finance&Resourceswas absent due to ill health from24 June2013 to25March2014.

Emoluments in theyear to31March 2014£’000

2013£’000

2014 No. 2013 No.

4 51 11 22 10 1

9. Employees

10. Board Members and Executive

None of the Board Members received emoluments. Board members expenses totalled £3,945 in theperiod to 31 March 2014 (2013: £2,527).

The emoluments including pension contributions and benefits in kind paid to the Chief Executiveand the other three Executive Directors are set out below. All four Directors are ordinary members ofthe Greater Manchester Pension Scheme and no enhanced or special terms apply. The Trust doesnot make any additional contribution to individual pension arrangements of any of theExecutive Directors.

The full time equivalent number of staff andDirectorswho received emoluments:

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£60,001£70,001£80,001£90,001£100,001

£70,000£80,000£90,000£100,000£110,000

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59

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448

4200

Cost

At 1 April 2013 125,868 1,330 127,198

Works to existing properties 5,126 - 5,126

Properties acquired 937 - 937

Additions - 2,648 2,648

Schemes completed 1,840 (1,840) -

Disposals (886) - (886)

At 31March 2014 132,885 2,138 135,023

Gap Funding

At 1 April 2013 (26,389) - (26,389)

Additions (4,658) - (4,658)

Released on disposal 196 - 196

At 31 March 2014 (30,851) - (30,851)

Other capital grant

At 1 April 2013 (1,242) - (1,242)

Additions (92) - (92)Released on disposal 3 - 3

At 31 March 2014 (1,331) - (1,331)

Depreciation and impairment

At 1 April 2013 (12,227) - (12,227)

Charged in year (2,925) - (2,925)

Released on disposal 88 - 88

At 31 March 2014 (15,064) - (15,064)

Net book value

At 31 March 2014 85,639 2,138 87,777

At 31 March 2013 86,010 1,330 87,340

Social housingproperties

Housing properties at 31 March 2014 and 31 March 2013 are comprised entirely of freeholdland and buildings.

PropertiesFor Letting

£’000

Properties UnderConstruction

£’000

Total£’000

11. Tangible fixed assets - properties

2013

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Components capitalised 5,126 15,628Amounts charged to income and expenditure account 5,948 16,170

11,074 31,798

Expenditureonworks toexistingandacquiredproperties 2014£’000

2013£’000

11. Tangible fixed assets - properties (continued)

12. Tangible fixed assets - others

Total accumulated grants received or receivable at 31 MarchGap Funding - capital grant 30,851 26,389Other capital grant 1,331 1,242Gap Funding - revenue grant 6,259 5,083

38,441 32,714

SocialHousingAssistance 2014£’000

2013£’000

CostAt 1 April 2013 658 1,864 - 2,522Additions 3 138 338 479At31March2014 661 2,002 338 3,001

DepreciationAt 1 April 2013 (422) (1,541) - (1,963)Charged in year (94) (226) - (320)At31March2014 (516) (1,767) - (2,283)

Net book valueAt31March2014 145 235 338 718

At31March2013 236 323 - 559

Furniture fixturesand fittings

£’000

Computers andrelated equipment

£’000

CommunityCentre£’000

Total£’000

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61

0161

448

4200

14. Debtors

15. Creditors: amounts falling due within one year

13. Stock of Materials

2014£’000

2013£’000

Maintenance materials 94 69

2014£’000

2013£’000

Rent and service charges receivable 2,792 2,505Less:Provisionforbadanddoubtfuldebts (2,175) (1,902)

617 603Grant funding receivable - 5,202VAT incurred and recoverable 218 2,212Other debtors 1,380 524Prepayments and accrued income 960 7,788

3,175 16,329

Duewithinoneyear

Prepayments and accrued income includes advance payments under various new build andenvironmental improvement contracts which total £0.3m at 31 March 2014 (2013: £5.8m).

2014£’000

2013£’000

Loans due in less than one year (note 18) 2,084 -Rent and service charges received in advance 414 338Leasehold sinking funds (note 16) 312 367Other taxes and social security costs 142 144Trade creditors 366 85Other creditors 373 568Accruals and deferred income 1,482 1,471

5,173 2,973

2013

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62

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

Loansdueinmorethanoneyear (note18) 65,650 81,000Loanarrangement feestobeamortised (633) (663)

65,017 80,337

2014£’000

2013£’000

18. Loans

Bank loans - due within one yearRepayable within one year 2,084 -

Bank loans - due after more than one yearRepayable more than one year but less than two years 2,582 10,000Repayable more than two years but less than five years 9,518 5,000Repayable more than five years 53,550 66,000

65,650 81,000

Total Debt 67,734 81,000

Amounts due all relate to a single facility from Barclays Bank. All amounts drawn are repayable byMarch 2029. The bank loan is secured by fixed charges over theTrust’s housing properties. At theBalance Sheet date all loans drawnwere arranged on a fixed interest rate of 5.07% plusmargin. Afurther £7.5m loans were available on variable interest rates but undrawn at 31March 2014.

Bank loans - dueaftermore thanoneyear 2014£’000

2013£’000

16. Leaseholder Sinking Funds

At 1 April 367 366Additions during period 15 47Incurred on works during period (59) (143)Reclassified as debtors (11) 97At 31 March 312 367

Funds are held on behalf of leaseholders to fund their share of works carried out. As there is nocontracted right to defer payments beyond 31 March 2015 this balance is held in amounts fallingdue within one year on the balance sheet.

2014£’000

2013£’000

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63

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448

4200

19. Non-equity share capital

2014 2013

At 1 April 8 8Shares issued during the year 2 1Shares surrendered during the year (2) (1)At 31 March 8 8

The shares provide members with the right to vote at general meetings, but do not provide anyrights to dividends or distributions on a winding up.

Sharesof£1eachissuedandfullypaid

Manchester City Council possess one third of the share capital of the Trust. The balance of theshares are held by tenant and independent Board members as set out below.

20. Reserves

21. Financial commitments

2013£’000

At 1 April 18,857 28,251Surplus/(deficit) for the year 3,112 (7,951)Actuarial gain / (loss) relating to pension scheme 2,268 (1,443)At 31 March 24,237 18,857

RevenueReserves 2014£’000

2014£’000

2013£’000

Expenditure contracted for but notprovided in the accounts 2,713 6,721

Expenditure authorised by the board,but not contracted 19,406 13,869

22,119 20,590

The above contracted for commitments are to be funded by surplus cash holdings at the balancesheet date plus undrawn loan facilities and cash generated from operations. Based on the termsof the loan facility, and independent property valuations, Southway possessed sufficient cover tosupport all the commitments disclosed above.

Capital expenditure commitments

2013

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64

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23. Contingent liabilities

The Trust had no contingent liabilities at 31 March 2014 (2013: £nil).

24. Reconciliation of operating surplus to net cash inflow fromoperating activities

2014£’000

2013£’000

Operating surplus/(deficit) 5,311 (5,318)Depreciation of tangible fixed assets 3,245 3,878Loss on the disposal of components 24 -Gap Funding revenue grant receivable (1,176) (1,621)Pension contributions paid (784) (935)Pensions operating charge 1,147 1,120

7,767 (2,876)

Working capital movements(Increase) in stock (25) (2)Decrease/(Increase) in debtors 7,952 (3,119)Increase/(Decrease) in creditors 116 (613)Net cash inflow/(outflow) from operating activities 15,810 (6,610)

22. Operating leases

The payments which the Trust is committed to make in the next year undernon-cancellable operating leases are as follows:

2014£’000

2013£’000

Office Accommodationlease expiring one to five years 234 -lease expiring over five years - 318

Maintenance vehiclesleases expiring within one year 123 -lease expiring one to five years - 150

Office equipmentlease expiring one to five years 12 12

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65

0161

448

4200

26. Analysis of net funds

27. Financial assets and liabilities

Throughout the period the Trust did not acquire any derivative instruments to support its loanfunds or for any other purpose.

Surplus cash during the period was deposited in UK financial institutions as deposits and moneymarket transactions, with all amounts either at call or at notice of periods not exceeding twomonths.

The realisable value of all financial assets and liabilities was equal to book value at all times.

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

2014£’000

2013£’000

Increase in cash 3,049 3,846(Decrease) in liquid resources - (8,648)Reduction/(increase) in debt 13,236 (21,107)Increase/(decrease) in net funds from cash flows 16,285 (25,909)Opening net debt (75,608) (49,699)Net debt at 31March (59,323) (75,608)

Cash at bank and in hand 4,729 3,049 - 7,778Changes in debt (80,337) 13,266 (30) (67,101)Changes in net debt (75,608) 16,315 (30) (59,323)

1 April2013£'000

Cashflow£'000

Non cashmovements

£'000

31 March2014£'000

2013

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28. Pensions

Greater Manchester Pension Fund

Southway participates in two Greater Manchester Pension Fund schemes. The scheme is for staffwhich transferred from the Council; the other is for new employees. Both schemes operate under thesame assumptions, this has led to the results being amalgamated in the notes which follow.

Both Greater Manchester Pension Fund schemes are multi-employer schemes, administered byTameside Metropolitan Borough Council under the regulations governing the Local GovernmentPension Scheme, a defined benefit scheme. The most recent formal actuarial valuation was completedas at 31 March 2013 and rolled forward to 31 March 2014 by a qualified independent actuary.

The employers’ contributions to the fund by the Trust for the period ended 31 March 2013 were £784k(2013: £935k) at a contribution rate of 18.6% of pensionable salaries (2013: 18.6%).

Pension increase rate 2.8 2.8Salary increase rate 3.9 4.6Expected return on assets 5.9 5.1Discount rate 4.3 4.5

Breakdownofexpectedreturnonassets:Equities 6.6 5.7Bonds 3.8 3.5Property 4.8 3.9Cash 3.7 3.0

31 March 2014% per annum

31 March 2013% per annum

Financial assumptions

Major categories of plan assets as apercentageof total plan assets

Equities 72% 72%Bonds 17% 17%Property 6% 5%Cash 5% 6%

100% 100%

31 March 2014 31 March 2013

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67

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4200

2014 2013

Retiring today:Males 21.4 20.1Females 24.0 22.9

Retiring in 20 years:Males 24.0 22.5Females 26.6 25.0

NumberofYears

2014£’000

2013£’000

Present value of funded obligations: (34,014) (32,461)Fair value of plan assets 28,899 25,602

(5,115) (6,859)Present value of unfundedobligations - -Net liability recognised in balance sheet (5,115) (6,859)

Amounts recognised in the balance sheet

Within the past three years, investigations have been carried out by the scheme actuaries intothe mortality experience of the association’s scheme. These investigations concluded that thecurrent mortality assumptions include sufficient allowance for future improvements inmortality rates. The assumed life expectations on retirement at age 65 are:

Mortality assumptions

2014£’000

2013£’000

Current service cost 1,062 968Past service cost 11 152Losses on curtailments 3 -Transfers 71 -Total operating charge 1,147 1,120

Analysis of theamount charged tooperatingsurplus/(deficit)

2013

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Expectedreturnonpensionschemeassets 1,319 1,212Interest on pension scheme liabilities (1,480) (1,291)Net interest (161) (79)

Analysis of theamount charged toother finance costs

Actual return less expected return onpension scheme assets 1,217 2,269

Changes in assumptions underlyingthe present value of scheme liabilities 1,051 (3,712)

Total actuarial gain/(loss) recognised in STRSD 2,268 (1,443)

Cumulative actuarial loss recognised in STRSD (4,398) (6,666)

Analysis of amount recognised in statementof totalrecognised surpluses anddeficits (STRSD)

2014£’000

2013£’000

2014£’000

2013£’000

28. Pensions (Continued)

2014£’000

2013£’000

Scheme liabilities less assets at start of year (6,859) (5,152)Current service cost (1,062) (968)Past service costs (11) (152)Losses on curtailments (3) -Transfers (71) -Contributions 784 935Other finance costs (161) (79)Actuarial movement 2,268 (1,443)Scheme liabilities less assets at end of year (5,115) (6,859)

Movement in net liabilities during the year

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69

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448

4200

Opening scheme liabilities 32,461 26,335Service cost 1,062 968Interest cost 1,480 1,291Contributions bymembers 285 293Actuarial (gains)/losses (1,051) 3,712Past service costs 11 152Losses on curtailments 3 -Transfers 626 -Benefits paid (863) (290)Closing scheme liabilities 34,014 32,461

Changes in present value of scheme liabilities 2014£’000

2013£’000

2014£’000

2013£’000

Opening fair value of plan assets 25,602 21,183Expected return 1,319 1,212Contributions bymembers 285 293Contributions by employer 784 935Actuarial gains 1,217 2,269Transfers 555 -Benefits paid (863) (290)Closing fair value of scheme assets 28,899 25,602

Changes in fair value of scheme assets

Fair value of scheme assets 28,899 25,602 21,183 20,654 18,321Present value of scheme liabilities (34,014) (32,461) (26,335) (22,895) (24,945)Deficit on scheme (5,115) (6,859) (5,152) (2,241) (6,624)

Experience gains/(losses) on assets 1,217 2,269 (1,072) 387 3,887Experience gains/(losses) on liabilities 1,062 2 (35) (1,363) (3)

Amounts for the current andprevious four accounting periods

2013£'000

2014£'000

2012£'000

2011£'000

2010£'000

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28. Pensions (Continued)

0.5%decrease in Real Discount Rate 23% 3,9191 year increase inmember life expectancy 5% 1,0200.5% increase in Salary Increase Rate 10% 1,6200.5% increase in the Pension Increase Rate 12% 2,224

Sensitivity Analysis at 31March 2014 Approximate increase toemployer obligation

Approximate monetaryamount (£000)

29. Related parties

There were up to four tenant Members of the Board during the year. Their tenancies are on normalcommercial terms and they are not able to use their position to their advantage.

During the year three members of the Board were Councillors with Manchester City Council, and oneBoard member was a senior manager at the same organisation. That local authority has nominationrights over tenancies for most of Southway’s properties. All such lettings and all other transactionswith the Council are on normal contractual/commercial terms and the Members concerned are notable to use this relationship to personal advantage.

30. Stock transfer obligations

Immediately prior to entering into the Stock Transfer Agreement between Manchester City Council(‘the Council’) and the Trust, the Council contracted with the Trust to perform the refurbishmentworks required to bring the properties into an agreed state. The contract was for a fixed sum equal tothe expected cost of the works i.e. £155million. At transfer the Trust contracted with the Council toacquire the benefit of the agreed refurbishment works (£155million) plus the housing properties at aprice equal to the agreed value of the property in its unenhanced condition. The nature of the worksunder the initial agreement has not been specified and a right of set off exists between the contracts.These contracts have enabled the Trust to recover VAT on repair/improvement costs that wouldotherwise have been expensed.

At the time of the transfer the Trust paid over a net cash amount of £nil to the Council, representingthe acquisition of the properties in their unenhanced condition and the value of the Council'sobligation to carry out the refurbishment works (£155million), less the amount due to be incurred bythe Trust under the development agreement in relation to the anticipated cost of therepairs/improvements (£155million).

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4200

The impact of these two transactions is that whilst the Council has a legal obligation to the Trust tocomplete the refurbishment works, this work has been contracted back to the Trust who are alsolegally obligated. The underlying substance of the transaction is therefore that the Trust has acquiredthe properties in their existing condition at their agreed value, and will complete certainrepairs/improvements in line with guarantees to Tenants. In the opinion of the Board, the commercialeffect of these transactions when viewed as a whole does not, in practice, create separate assets andliabilities for reporting purposes.

Therefore, in accordance with FRS5 the resulting debit and credit balances, relating to the legalobligation of the Council to complete the refurbishment works for the Trust and the equal andopposite legal obligation of the Trust to perform the refurbishment works for the Council, have beenoffset and are not recorded in the balance sheet.

At 31 March 2014 refurbishment works to the value of £129.0 million had been completed(2013: £119.4 million).

2013

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14

Community Commitment - Burnage


As a social landlord, we domuchmore than just repairs and collecting rent;responsibilities for social landlords have becomemuchmore widespreadand now include providing an array of services for tenants as well as largeinvestment in the community.

Committed to the community

“Community Commitment Day” is a day wherecommunity projects are carried out by the entireorganisation, including all back office staff.

This year it was on Thursday March 20 and it sawaround 160 staff carrying out tasks from cleaningup community gardens and painting communitycentres to hosting international food events withadvice and information stands. (See ourFacebook page for more pics!)

Examples of work carried out included;

• Burnage Community Centre was refurbishedalong with a reading event at Burnage Librarywhere the community garden was given afacelift; the library tweeted (on our twitterpage) “Great day today with lots of work fromdedicated supporters. Big thanks to@SouthwayHousing and their fantastic staff.”

• Southlea Community Gardens wastransformed with bird boxes, plants andhedgehog homes with help from the localcommunity, Ladybarn Primary School andBurnage Media Arts College.

• Didsbury Park Pavilion was painted andrefurbished, with Didsbury Good Neighbourscommenting that the work carried out hadbeen done“very professionally”and that “itlooks amazing”.

• The Lost Plot on Arrowfield Estate in Chorltonhad a pagoda built, guttering to the greenhouseand lotsmorewith the team from the plotsaying:“Just wanted to say a huge thank you toall the Southway bods for a terrific day's work forthe Southway Community Commitment Day.Everyone did a great job and seemed to havefun doing it.”

• Ladybarn Community Centre had lots ofinternal and external work with Mags, theCentre Manager, saying: “They were a lovelygroup of people and worked so hard. It wouldhave cost us thousands to do everything thatwas achieved and we're really grateful.”

There are many more examples of the hugeamount of work carried out on the day and thehope is that the projects have a long-lastingbenefit to the community.


Documents

Southway accounts v8 lr