Annual Report and Financial Statements for the year ended 31 March 2018

We build homes, create communities and transform lives

Wellbeing 4 Uour united experience

3

G O V E R N A N C E R E P O R T

30 Chair’s introduction to corporate governance34 Management and advisors36 Board report39 Financial review

A B O U T U S

06 Who we are 08 What we do 14 The risks we face

F I N A N C I A L S T A T E M E N T S

44 Independent auditor’s report47 Statements of comprehensive income48 Statements of financial position49 Statements of Cash Flows51 Notes to the consolidated financial statements

F O R E W O R D

04 Foreword from the Chair and Group Chief Executive

04

02

01

05

03 A C H I E V E M E N T S T H I S Y E A R

17 We provide more homes 19 Tenants successfully maintain their tenancies 20 Our customers experience an excellent and efficient service 22 Our communities are places where people want to live 26 Our people deliver to their potential 28 Our finances sustain our business

C O N T E N T S

We have had another dynamic and rewarding year at United Welsh with a number of highlights.

We were particularly delighted to have extended our partnership with Cardiff and the Vale NHS Trust for our social prescribing service Wellbeing 4U. This service is making a real difference to people’s lives and chimes very well with our desire to ensure people live their best lives, making the most of their potential and strengths.

We were also proud to have been awarded Investors in People Gold for the third time. This is a real testament to the hard work of our people and a fitting tribute to the dedication of our staff.

As we look ahead we believe that our strong performance in the provision of new, affordable housing positions us well to contribute strongly to the Welsh Government’s current target of 20,000 new homes.

Our core business, of course, remains our commitment to our tenants and communities. We know that our Money Advice work has made a tangible difference to many people’s lives and this will continue to be a major focus for us as we constantly look for ways to tackle poverty.

Finally, we would like to express our thanks to all of our colleagues at United Welsh and Celtic Horizons for their hard work and commitment. Our appreciation is also extended to the Board members for their significant contributions.

As the Chair and Group Chief Executive, we are pleased to present our annual report for the year ended 31 March 2018.

44

F O R E W O R D

Lynda Sagona, Group Chief Executive

Grahame Sturges, Chair

We draw together our talented people, financial resources and assets, good partners, engaged tenants and our strong reputation in

order to deliver our strategic outcomes.

A B O U T U S

6

W H O W E A R E

We are an independent business providing housing and related services, applying all our resources for community benefit. We build homes, create communities and transform lives.

How we work is driven by our Values:

AccountabilityBeing open. Doing what we say we’re going to do. Taking ownership

of our actions.

Bravery Being confident to

challenge and take measured risks.

Supporting Encouraging our people,

partners and communities to release their potential to

achieve their goals.

EqualityListening to and respecting people and communities.

Treating people as individuals.

PartnershipWorking together in

productive relationships, both internally and externally.

DeterminationNot giving up on

our goals.

CreativityWelcoming new

ideas and ways of doing things.

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We have a unique approach to our staff engagement and strong partnerships with other organisations which means we have a track record of making things happen. We invest in our communities, building on the strengths of the people living there.

We engage with our customers through social media, tenant profiling and surveys, providing support services, holding events locally and through our Together project. ‘Together’ seeks to provide different strands of tenant engagement – providing support to find work or volunteering opportunities; engaging directly with United Welsh on the Together Panel which provides a space for discussion and scrutiny, and financial support from the Together Fund for local initiatives.

We draw together our talented people, financial resources and assets, good partners, engaged tenants and our strong reputation in order to deliver our strategic outcomes. How well we did this year is described on the following pages.

United Welsh team who took part in the Muddy Run challenge

88

Where possible we align our activity to the broader objectives of both the Welsh Government and other partner organisations. We are well placed to help achieve targets set for building new affordable homes, realising the aims of the Wellbeing of Future Generations Act and supporting local authority partners and local health boards to work effectively.

We are able to work with local authorities and developers to provide new homes both through grant-funded schemes and through planning gain arrangements. Where possible we access other sources of funding, such as the Vibrant and Viable Places scheme to provide support for bringing empty homes back into use.

Demand for general needs housing is strong in most areas that we cover. We work closely with our local authority partners to address small pockets of low demand, often working alongside the private rented sector.

There continues to be demand for specialist housing for older people, who appreciate the security and support available on-site as well as the companionship of others of similar age and background. Increasingly we work in partnership with health boards to provide accommodation for older people moving on from hospital care.

Specialist housing for people requiring support is in high demand.

This client group is diverse – people emerging from drug and alcohol abuse, fleeing domestic violence, poor mental health, learning disability, young people leaving care. We work in partnership with specialist support providers in many projects. Where we are providing the support ourselves, we have developed a way of working that seeks to build confidence by identifying the individual strengths and building on that, rather than focussing on problems and issues to be solved.

W H A T W E D O

We provide affordable homes to rent or buy in communities in 11 different local authority areas across South East Wales, including a range of homes for people with support needs. We provide services in the community to support people in improving their wellbeing.

We work in partnership with health boards

We work with local authorities and developers

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We provide services in the community to support people to improve their wellbeing.

Kaitlin and Sienna enjoy the Bryn Aber street partyWorking with health at our scheme in Brynteg Road

Tenant Phillip Bevan celebrates his 100th birthday at Plas Hyfryd

1010

5743Homes

Neath Port Talbot

Bridgend

02

01

01 02 03 04 05

*Low cost home ownership

N U M B E R O F A F F O R D A B L E H O M E S P R O V I D E D

General – – – – 1732 Older persons – – – – 246 Supported 21 81 10 100 128 LCHO* – 5 – 8 101

General Older persons

Supported LCHO*

11

Monmouth

11

Rhondda Cynon Taf

04

Merthyr Tydfil

03

Vale of Glamorgan

07

Cardiff

06

Caerphilly

05

Blaenau Gwent

08

Torfaen

09

Newport

10

0706 08 09 10 11

943 376 577 67 105 11 193 – 336 – – 44 405 43 69 10 10 – 29 49 17 – 27 –

3811General

819Older persons

877Supported

236Low cost home ownership

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98% of homes meet the Welsh Government minimum SAP rating of 65 for energy efficiency. Our average rating is 81. At the end of March 2017 the All Wales housing association median rating was 71.

Environment

United Welsh recognises its impact upon the environment in a number of ways. We are committed to achieving continual improvement in environmental performance and pollution prevention, and in supporting the Welsh Government’s goals of a prosperous and resilient Wales. We achieve this through:

• Sustainable asset and energy management

• Preparing for low carbon homes• Building sustainable cohesive

and inclusive communities • Enhancing landscape and

biodiversity• Promoting water efficiency • Engaging staff in a sustainability

campaign

Equality and diversity

United Welsh is committed to equality and diversity in employment and the provision of its services. This means we:

• Recognise that everyone is different and treat these differences with respect

• Value the diversity of all people we work with

• Consult to ensure that we deliver services openly and fairly, and in ways which suit our customers

• Invest in a skilled, stable and diverse workforce

• Protect our staff from discrimination • Work with partners who share

our equality values• Challenge discrimination in all

its forms

We are committed to monitoring the effects of equality and diversity and to mainstreaming equality, diversity and human rights across the organisation. Above all, we will continue to promote and deliver equality as an integral part of who we are and what we do.

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Benchmark*

Benchmark**2O17/18

2O17/18

2O17/18

750 80 80

1000 85 85

250 70 70

500 75 75

1250 90 90

1500 95 95

1750 100 100

£ % %

£1459

85%£999

98.6%

88.5%

Management costs per social housing unit

Occupancy (% properties let)

Tenants satisfied with the service provided

Benchmarks are: * 2016/17 Global accounts for traditional RSLs; ** 2016/17 Housemark peer group.

United Welsh is committed to releasing the potential of the people we work with, and the value of our investment in homes and communities. We work to deliver our services efficiently in a timely, simple way without wasting resource and we know that Value for Money is not just about efficiency; it is also about effectiveness.

We understand the need to use our capital, assets and resources effectively in a commercial manner where we let innovation shine and maximise the return on our investments. We recognise that by valuing our people and investing in them, we will achieve excellent results.

Value for money – making the most of our resources

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In line with our core value of Bravery, we do not avoid risk, but rather seek to manage risk, minimising exposure to loss from any activity while maximising the benefit to us and our customers and making the best use of resources. In undertaking any new activity or extending existing activity we seek to protect and safeguard our assets, reputation and the quality of service provided to existing customers.

T H E R I S K S W E F A C E

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Key strategic risks include:

Major fraud and cyber security failure

There are an increasing number of attempts to perpetrate fraud and cyber attacks. We have developed good policies and procedures, which our staff are familiar with, to prevent fraudulent claims on our resources and we have upgraded our cyber security and achieved CyberEssentials Level 2 accreditation. We recognise that this area of risk is always evolving and that we need to maintain our vigilance.

1515

Upper Warning Level

2O17/18 2O16/17 Benchmark*6

5

4

3

2

1

9

8

7

10

%

10%

3.03% 3.36%2.85%

The impact of Universal Credit is drawing closer. At worst tenants may not pay their rent at all. We have programmes in place to encourage tenants to think Rent First. Our Money Advisers are geared up to provide budgeting support and make sure all new tenants make the most of their benefit entitlements. Our policy of rent in advance for new tenants builds a buffer against those weeks when they find it difficult to pay.

*Benchmark is Housemark 2016/17.

Non-payment of rent

Level of rent owed

Acceptable level2O17/18

60

50

40

30

20

10

90

80

70

100

%

100%100%

Properties with a current GAS certificate

The safety of our tenants and our staff is paramount. Any failure in this area could be catastrophic. Therefore we have in place regular monitoring and checks for the major health risks, such as legionella, and safety risks such as gas and electrical. We draw on the expertise of Mears Ltd, our asset management partner in Celtic Horizons, to manage these risks and train staff appropriately.

Health and Safety failure

We recognise that by valuing our people and investing in them, we will achieve excellent results.

A C H I E V E M E N T S T H I S Y E A R

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During 2017/18 United Welsh Group built 182 new homes.

This makes our 5-year rolling programme total 1265 completions, slightly below our target range of between 1300 and 1700. However our forward programme is strong and moving on a year we expect the 5-year total to be a little over 1400 homes.

Family housing completed in 2017/18 included 12 new flats on the site of the former Goodrich Hotel, Caerphilly, 100 homes in the Vale of Glamorgan across five different sites and 37 homes at Clos y Cwarra in St Fagan’s, Cardiff.

Our specialist housing team spent most of the year promoting and preparing for our group venture in

producing homes for market sale under our harmoni homes brand. But they still completed on five new homes under our mortgage rescue scheme and the Homestep Plus scheme in Rhondda Cynon Taf.

A new supported housing scheme providing much-needed accommodation for young people in Aberdare was officially opened during the year. Consisting of five fully furnished modern apartments, The Old Bakery in Trecynon near Aberdare town centre will support young people aged 16 – 21 to develop their independent living skills.

We also opened Ty Annog which is accommodation to help young people aged 16-24 who are at risk of homelessness in Blaenau Gwent.

W E P R O V I D E M O R E H O M E S O F T H E R I G H T K I N D , I N T H E R I G H T P L A C E , I N T H E R I G H T C O N D I T I O N

5-year total going forward:

over 1400 homes

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This year we completed our planned maintenance programme which included carrying out 456 window overhauls, 138 central heating system upgrades, 79 boilers and 88 kitchen renewals. We are also completing a programme of bringing electrical testing into a 5-year cycle, ensuring our tenants can feel safe in their homes. Allied to this we are pleased to report 100% of our properties at the year-end had a current gas safety certificate. We do not own any buildings over five storeys, however this year we have had a particular focus on fire risk management best practice.

We want to ensure we are always striving to do our best for our customers and continue to challenge ourselves to improve our satisfaction levels. Other similar providers generally achieve in the range of 77%-87%. We are achieving comparable levels to other providers.

89%tenant satisfaction with recent repair.

(2017: 92%) 85%tenant satisfaction

with the way we deal with repairs

(2017: 76%)

Celtic Horizons Apprentices

Maintaining homes in the right condition is just as important as building new. This is taken care of through our asset management service Celtic Horizons.

Window overhauls:

456Kitchen renewals:

88 Boilers:

79

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T E N A N T S S U C C E S S F U L L Y M A I N T A I N T H E I R T E N A N C I E S

We carried out only 14 evictions for rent arrears in general needs accommodation in the year 2017/18. This compares favourably with previous years (2016/17: 19). Although the arrears trend has been slightly upward this year, arrears are still significantly lower than we have seen in previous years. This demonstrates that we are successfully managing arrears and maintaining tenancies whilst also lowering the numbers of evictions taking place.

To help tenants visualise what they need to do as Universal Credit is rolled out, we devised our campaign Bob: Banking-Online-Budgeting Bob can be seen around the community on buses and in a film online.

Across all tenancies we are seeing upward trends in gross arrears values, as we experience a very challenging environment, with more tenants presenting with increasingly complex needs.

85%of new tenancies

lasted > 12 months. (2017: 79%)

Gross rent arrears were

3.03% total rent. (2017: 2.85%)

59%tenants had

internet access. (2017: 57%)

Bob: Banking-Online-Budgeting

Boilers:

79

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In measuring customer experience against UK-wide businesses across a variety of sectors in September 2017, we were pleased that our Customer Effort score (that is how much effort it takes to contact us, so the lower the score, the better) had fallen not just in comparison with our score the previous year, but was below the all-sector average. Our net promoter score remains higher than the all-sector average, which is good. We are working to improve our overall score on the UK Customer Satisfaction Index which had fallen compared with last time. Our most recent survey results indicate that 89% of tenants were satisfied with services provided, compared with 78% at the same point in 2017.

O U R C U S T O M E R S E X P E R I E N C E A N E X C E L L E N T A N D E F F I C I E N T S E R V I C E

UKCSI score

68.3UK all-sector average 77.8

(2017: 70.9)

Net promoter score

19.5UK all-sector average 13.9

(2017: 25)

Customer effort score

4.3UK all-sector average 4.8

(2017: 5.3)

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One of the areas of focus for us over the next year will be on how we resolve and handle complaints.

‘I want to make a complaint’ was one of the customer journeys that we mapped during the year to see how we could make it better. With improved communication so that everyone knows what to expect and clearer reporting, we will be looking for improvements over the next year. We have recently relaunched our Tenant App to allow for easy access to accounts, and enable simple reporting of repairs. This is part of our Digital Transformation project which is looking at lots of ways that using digital technology can make life easier for both tenants and staff.

For example... Staff from Celtic Horizons have been sharing their expertise in a new series of ‘How to…’ short films. The aim is to provide a portal of information for tenants who want to try a basic home repair for themselves. They include changing a fluorescent lamp, using heating controls and unblocking a basin or toilet.

In measuring customer experience against UK-wide businesses across a variety of sectors, we were pleased that our Customer Effort score had fallen.

Screenshot from one of our ‘How to...’ short films

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O U R C O M M U N I T I E S A R E P L A C E S W H E R E P E O P L E W A N T T O L I V E

United Welsh has been re-awarded a contract to deliver a community well-being service on behalf of NHS Wales in Cardiff and the Vale of Glamorgan starting from April 2018.

The main areas of focus are increasing physical activity, improving diet, improving immunisation and screening uptake and reducing harmful habits such as smoking and substance misuse. April 2018 also saw the anniversary of our joint floating support contract in

Cardiff. In partnership with the Salvation Army the project aims to prevent homelessness among vulnerable individuals and families by offering a 12-week tailored support package.

Mr M was referred for tenancy support, but he also had a history of alcohol problems and debts as a result. This made him anxious and things were spiralling out of control. By meeting a support worker on a weekly basis Mr M was able to be signposted to help, including the United Welsh Money Advice Team. As a result he received a back payment of allowances and so has paid off his debts, decorated his flat and bought himself a new bed.

Took

34 days on average to relet empty properties

(2017: 37)

30of those were still

in work after 1 year. (2017: 22)

66opportunities for

paid/unpaid work for tenants or people who

are not our tenants. (2017: 43)

Get our tenants physically active and more

engaged with us.

Reducing harmful habits such as smoking and

substance misuse.

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Nathan Blake signing a shirt at Fit and Fed event

StreetGames Wales team with Pudsey Bear Fun exercise activities were organised for the day

Fit and Fed Campaign

During the summer we ran a project under the national Street Games Fit and Fed campaign which aims to provide children and young people from deprived areas in the country with free access to activity sessions, with lunch included, throughout the summer holidays. The aims of this project for us were to tackle holiday hunger in our key areas, get our tenants physically active and more engaged with us.

Providing young people with free access to activity sessions.

2424

Jarrad Skidmore of Pendragon Ltd.

A wealth of jobs and training opportunities were presented to people seeking work in Caerphilly when United Welsh hosted a Jobs Fair in November.

“I found the Jobs Fair really helpful with loads of information provided and companies to speak with.”

Held at Twyn Community Hall in Caerphilly town centre, over 80 people attended the event which featured 12 companies hosting information stands, from the young people’s charity The Princes Trust through to engineering giant GE Aviation.

There were many success stories from the day with people securing work experience as well as paid jobs. One of these was 19-year-old Jarrad Skidmore from Gelligaer. Jarrad worked for the Royal Army until last February, when unfortunately he had to be released due to an injury. He heard about the event via the Communities for Work programme and was keen to attend. After talking to Cwmbran-based construction company Pendragon Ltd at the Jobs Fair, Jarrad met the team on site and was offered a full time general operative role.

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Genevieve Callander and Peter Watkins at the New Road in Rumney, Cardiff

A wealth of jobs and training

opportunities

Securing work experience as well

as paid jobs

As a single mum of two, 41-year-old Genevieve Callander is used to multi-tasking and problem solving, but thanks to a paid work opportunity with United Welsh, Genevieve has taken her skills to the building site. After getting involved with our Together programme, Genevieve from Cardiff Bay is now completing her first Quantity Surveying placement at United Welsh’s housing development at New Road in Rumney, Cardiff.

From the classroom to the construction site for Genevieve.

“I can’t believe how lucky I’ve been. The transition from university to placements on site has been so smooth and now I’m getting practical experience I understand the theory I’m learning in the classroom so much more.”

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O U R P E O P L E D E L I V E R T O T H E I R P O T E N T I A L

2018 2017

Full time Part time Full time Part time

Operations Neighbourhoods 38 5 28 7

Thrive 55 15 38 18

Customer engagement 8 1 7 2

Development 15 3 16 4

116 24 89 31

Resources Finance 14 0 12 0

Digital solutions 10 0 8 0

Human resources 4 1 4 2

Communications 4 0 3 0

Corporate services 0 1 0 1

32 2 27 3

Chief Executive Executive Team 3 0 3 0

Governance 2 0 3 0

5 0 6 0

United Welsh 153 26 122 34

Celtic Horizons 121 29 127 18

Total 274 55 249 52

United Welsh Group employed 329 staff at 31 March 2018 (2017: 301)

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It has resulted in having equipment to make us more mobile and being able to choose not to be tied to a particular desk. We have also become more flexible in relation to fixed work hours, so that staff are expected to manage their workload and are able to balance work and home commitments.

This is predicated on trusting staff to know what needs doing and get on with it. We believe this demonstrates the value we place on colleagues and their commitment to the business.

In September we launched the United Welsh Academy for its second year, offering internships and an apprenticeship in a variety of departments. The Academy was a great success last year, with all the interns moving into a full-time job straight after their time with us finished or just before.

Communications Intern Emma Thomas said:

For United Welsh employees we embarked on a project known as the Future Workplace. This has involved staff from across the organisation in thinking about how we could transform the way we work to make us fit for the future.

“I’m also developing my own personal portfolio so I can keep a track record of my learning, helping me to be ‘interview-ready’ once my internship is over.”

“I’ve already done a variety of things I’ve never done before such as writing articles, event organisation, interviewing staff and tenants and social media campaigning for housing sector issues – all in the first month of my internship!”

Our interns from left to right – Jodie, Emma, Nicola and Adam

Emma Thomas

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O U R F I N A N C E S S U S T A I N O U R B U S I N E S S

Interest cover was

153% (2017: 192%)

Gearing was

67% (2017: 66%)

5 year total reserves forecast

£50m (2017: £46m)

Security level on new

facility was

117%

The Financial Review on page 39 together with the Financial Statements gives the detail on our financial situation. We note here that our position continues to be strong, making sure we have the funds to deliver on our other ambitions.

How each £ of rent was spent

Management

Interest on loans

Services

Day to day and cyclical maintenance

Add to reserves

Depreciation

Development admin

15

24

18

20

9

122

17

23

18

19

9

122

...making sure we have the funds to deliver on our other ambitions.

2016/172017/18

The Board is committed to ensuring that it provides effective leadership and promotes sound ethical standards.

One of the ways in which the Board achieves this is by requiring that good governance principles and practices

are adhered to throughout the Association.

G O V E R N A N C E R E P O R T

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The Board is committed to ensuring that it provides effective leadership and promotes sound ethical standards. One of the ways in which the Board achieves this is by requiring that good governance principles and practices are adhered to throughout the Association.

Good corporate governance is about helping to run the Association well. It involves ensuring that an effective internal framework of systems and controls is put in place which clearly defines authority and accountability and promotes success whilst permitting the management of risk to appropriate levels.

It involves the exercise of judgement as to the definitions of success, the appropriateness of risk and the levels of delegation to the Executive Team.

The exercise of this judgement is the responsibility of the Board and involves consideration of processes and assumptions as well as outcomes. The Executive Team is required to provide such information to the Board as the Board needs to enable it to exercise its judgement over these matters.

During the year the Board reviewed the following:

• Composition, skills and experience of the Board and its members

• Performance of the Board• Governance Improvement Plan • Compliance with Codes of

Governance • Board members Code of Conduct,

Core Skills and Role Profile• Composition of the Celtic Horizons

Ltd Board of Directors and initial appointment of the Harmoni Homes Ltd Board of Directors.

The Board review of its own composition concluded that the Board continues to have the appropriate mix of skills, experience and diversity of background to enable it to work effectively in leading United Welsh to deliver the strategy determined for the next five years. Individual Board members discuss their performance with the Chair on an annual basis and, every three years with an independent consultant. The review in 2018 was one of the triennial consultant led reviews. A tailored training programme is put together where required.

C H A I R ’ S I N T R O D U C T I O N T O C O R P O R A T E G O V E R N A N C E

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Board members are drawn from a wide background.

We are pleased to note that in the annual Regulatory Assessment opinion for 2017, issued by the Welsh Government, United Welsh was assessed as ‘Standard’ for governance and services and ‘Standard’ in the Financial Viability judgement. Standard is the highest assessment level possible.

Legal frameworkUnited Welsh Housing Association Ltd is a charitable housing association regulated by the Welsh Government (Reg. no J099) and also registered with the Financial Conduct Authority under the Co-operative and Community Benefit Act 2014 (Reg. no. 26623R). Consumer credit activity undertaken by the Association is authorised by the Financial Conduct Authority (Firm ref. 742550).

United Welsh has two wholly owned subsidiaries, Celtic Horizons Ltd and Harmoni Homes Ltd. Celtic Horizons Ltd is a company registered under the Companies Acts (Reg. no. 7838396). Harmoni Homes Ltd is also a company registered under the Companies Acts (Reg. no. 10923446) and was incorporated on 18 August 2017.

The Association is responsible for ensuring that its business is conducted in accordance with the law and applicable standards and, in discharging this overall responsibility, United Welsh seeks to put in place proper arrangements for the governance of its affairs and for facilitating the effective exercise of its functions which include arrangements for the management of risk.

The Welsh Government as part of its regulation sets out delivery outcomes that we are expected to meet and assesses annually whether our governance and financial management meet their required standards.

Governance structure

The Board of United Welsh comprises up to twelve non-executive members, with potentially up to a further five co-opted members and is responsible for directing the affairs of the Group. New Board members agree to serve for a term of three years, with the option to continue for a further two three-year terms. Board members are drawn from a wide background bringing together professional, commercial and local experience. Co-option is used where specific expertise may be required

32

Leadership and working effectively as a team.

in addition to that already on the Board and to accommodate orderly succession in Board membership.

Membership is reviewed every year to ensure the Board contains the range of necessary skills.

Those skills include:

• Leadership and working effectively as a team

• Direct knowledge of the needs and aspirations of the communities and people served

• General business, financial and management skills

• Knowledge of the external framework, including financial markets, political imperatives and operating environments in which United Welsh works

• Other relevant and specialist skills such as commercial, financial, investment, risk management, legal, health, social services, property management and housing development

• Effective communication skills and an ability to focus on key issues facing United Welsh, and

• The ability to foster a culture that enhances commitment, enthusiasm and excellent performance from staff.

The Board is supported by two committees – Audit & Risk Committee and Remuneration & Governance Committee. The Boards of Celtic Horizons Ltd and Harmoni Homes Ltd each consist of two United Welsh Board members and two members of the Executive Team.

In order to ensure that the Group is well governed, the Association complies with the Community Housing Cymru Code of Governance and the National Housing Federation Code of Governance, and the Housing Association Circular 02/10 ‘Internal Controls and Reporting’ in all material respects. The only significant departure from the CHC and NHF Codes is on Board size and co-opted members, whereby the Board considers it reasonable to allow for additional co-opted members to supplement the full complement of 12 Board members in certain circumstances. A full explanation of how co-opting is used is given in the section on governance structure above.

The Board meets formally 11 times a year. It is responsible for the Group’s strategy and policy framework, delegating the day-to-day management and implementation of that framework to the Group Chief

33

Executive and other senior executives (the Executive Team). Each member of the Executive Team is an operational Director with teams of staff reporting to them. The Executive Team meets monthly and its members attend Board meetings.

Audit & Risk Committee

The Audit & Risk Committee comprises up to seven members selected by the Board, of whom at least four must be full Board members. It is attended by the Executive Team and meets at least three times a year. The Committee advises the Board on its responsibilities in relation to financial reporting and considers the appointment of internal and external auditors, the scope of their work and their reports. It also reports to the Board on the effectiveness of the Association’s internal control arrangements and scrutinises treasury management and risk management, including work on stress testing and business continuity.

Remuneration & Governance Committee

The Remuneration & Governance Committee comprises the Chair and up to four Board members selected by the Board. The Committee advises the Board on the remuneration and terms and conditions of service of the Executive Team, on the skills and composition of the Board itself, and on other governance matters. It meets at least once a year.

The Board is supported by two committees.

Antoine Azangisa Member since 2016. Carer for people with mental health issues and translator. United Welsh tenant.

Alan MeudellMember since 2011. Member of Remuneration & Governance Committee. Information and research officer (mental health and disability).

Jeremy Brown Co-opted member since September 2017. Managing director of a healthcare consultancy.

Phill Stokes Member since 2015. Member of Audit and Risk Committee. Construction and housing consultant. Member of the Chartered Institute of Building.

Joanne JonesAppointed in October 2017. Chartered Accountant working in a commercial healthcare company.

Damian WilliamsMember since 2014. Member of Audit and Risk Committee. Financial Director. Chartered certified accountant.

The

Boar

d of

Uni

ted

Wel

shO

ther

Mem

bers

The

Boar

d of

Uni

ted

Wel

sh

Offi

cers

Grahame Sturges Chair, since July 2016.Member since 2012. Member of Audit and Risk Committee. Member of Remuneration and Governance Committee. Director Celtic Horizons Ltd. Director Harmoni Homes Ltd. Retired housing manager.

Bart Geere Chair of Audit & Risk Committee.Member since 2016. Head of Process Architecture and Regulatory Reporting at a building society.

Kathryn Bergmanski Vice Chair and Chair of Remuneration & Governance Committee. Member since 2010. Chair Celtic Horizons Ltd. Former director of nursing and health strategy advisor.

34

Emma TamplinMember since 2016. Member of Remuneration and Governance Committee. Collaboration Partner for a charity promoting gender equality. Member of the Chartered Institute of Personnel and Development.

Gail WilliamsMember since 2015. Member of Audit and Risk Committee. Retired manager with particular interest in disability issues.

The

Boar

d of

Uni

ted

Wel

shO

ther

Mem

bers

The

Exec

utiv

e Te

am

Lynda Sagona Group Chief Executive (Appointed 2016) Previously Director of Housing and Communities at United Welsh (appointed 2009). Member of the Royal Institution of Chartered Surveyors.

Gareth Hexter Group Director Resources (Appointed 1998) Over 25 years experience of the housing sector. Director of Celtic Horizons Ltd. Director of Harmoni Homes Ltd.

Richard Mann Group Director Operations (Appointed 2005) Member of the Royal Institution of Chartered Surveyors. Director of Celtic Horizons Ltd. Director of Harmoni Homes Ltd.

Board members who resigned during the year: Ian Gilbert retired July 2017 (appointed 2008). Richard Baigent resigned January 2018 (appointed 2015). Nicola Beynon resigned February 2018 (appointed 2012).

35

Secretary Lynda Sagona Registered office Y Borth, 13 Beddau Way, Caerphilly, CF83 2AX This is also the registered address for Celtic Horizons Ltd and Harmoni Homes Ltd. Registered auditor KPMG LLP, 3 Assembly Square, Britannia Quay, Cardiff, CF10 4AX Bankers Lloyds Bank plc, 25 Gresham Street, London, EC2V 7HN Ad

vise

rs

B O A R D R E P O R T

36

The Board presents its financial review and audited financial statements of the Group for the year ended 31 March 2018.

The Group

The results for the year ended 31 March 2018 of the subsidiaries, Celtic Horizons Ltd and Harmoni Homes Ltd have been consolidated in the Group accounts.

Principal activitiesThe principal activity of the Association is the provision of affordable quality housing accommodation for those in housing need. As well as managing existing properties the Association is a developer of new affordable housing. The principal activity of Celtic Horizons Ltd is providing associated housing services. The principal activity of Harmoni Homes Ltd is to manage the development of new affordable housing stock for United Welsh Housing Association Ltd.

Board and senior executives of the GroupEach member of the Board holds one fully paid share of £1 in the Association. The senior executives of the Association hold no interest in the Association’s share capital and, although not having the legal status of directors, they act as executives within the authority delegated to them by the Board.

Internal control statementThe Welsh Government requires registered social landlords to report on internal controls in accordance with the Housing Association Circular 02/10 – Internal Controls and Reporting. The Board is responsible for the Group’s system of internal controls that is designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. The Board has reviewed the effectiveness of the system of internal controls for the period from 1 April 2017 to 28 June 2018.

37

The procedures that have been established to provide effective internal control are:• Corporate governance arrangements

and an organisational structure with clearly defined lines of responsibility

• Written financial procedures with delegated authorities

• A comprehensive system of financial reporting including annual budgets and monthly management accounts, to report actual performance against budget and to highlight variances

• A risk map maintained and reviewed by the Executive Team, Audit & Risk Committee and Board

• Audit & Risk Committee reviews of the fraud register at each of its meetings

• Monitoring of the internal controls and procedures by the Association’s internal auditor and external auditor

Internal audit services were obtained under contract with Barcud Shared Services for the year ended 31 March 2018.

Statement of Board’s responsibilities in respect of the Board’s report and the financial statements

The Board is responsible for preparing the Annual Report and the Group and Association financial statements in accordance with applicable law and regulations. Co-operative and Community Benefit Society law requires the Board to prepare financial statements for each financial year. Under that law the Board have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Association and of the Statement of comprehensive income of the Group and the Association for that period.

38

In preparing each of the Group and Association financial statements, the Board is required to: • select suitable accounting policies

and then apply them consistently; • make judgements and estimates

that are reasonable and prudent; • state whether applicable UK

Accounting Standards and the Statement of Recommended Practice have been followed, subject to any material departures disclosed and explained in the financial statements;

• assess the Group and the Association’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

• use the going concern basis of accounting unless they either intend to liquidate the Group or the Association or to cease operations, or have no realistic alternative but to do so.

The Board is responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Association and enable them to ensure that its financial statements comply with the Co-operative and Community Benefit Societies Act 2014. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such

steps as are reasonably open to them to safeguard the assets of the Group and the Association and to prevent and detect fraud and other irregularities.

The Board is responsible for the maintenance and integrity of the corporate and financial information included on the association’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of information to the auditor

The Board members who held office at the date of approval of this Board report confirm that, so far as they are each aware, there is no relevant audit information of which the Association’s auditor is unaware; and each Board member has taken all the steps that he or she ought to have taken as a Board member to make himself or herself aware of any relevant audit information and to establish that the Association’s auditor is aware of that information.

By order of the Board

Lynda Sagona, Secretary, 28 June 2018

39

The Group made a total surplus of £5.9m (2017 – £4.0m) for the year to 31 March 2018. Turnover increased by 14.7% to £35.9m (2017 – £31.3m) and operating costs in the same period rose by 17.7% to £23.6m (2017 – £20.0m). Interest and financing costs increased by 5.5% to £7.7m (2017 – £7.3m).

F I N A N C I A L R E V I E WFor the year ended 31 March 2018

GROUP REVENUE2018

£’0002017

£’000

Social lettings 25,790 24,308

Service charges 3,173 3,129

Amortised grant 1,987 1,876

Revenue grant 1,311 736

Non-social lettings 472 594

Other activities 3,164 700

TOTAL TURNOVER 35,897 31,343

GROUP OPERATING COSTS2018

£’0002017

£’000

Management costs 5,708 4,718

Service costs 2,984 2,719

Depreciation 6,125 6,038

Development administration 645 731

Day to day maintenance 5,688 5,239

Other activity operating costs 2,419 582

TOTAL OPERATING COSTS 23,569 20,027

The increase in social lettings reflects the annual increase in rents of 2.5% plus additional rent of £875,000 from new properties. Revenue grant has increased due to the successful tender bid to deliver the Cardiff Floating Support service in partnership with the Salvation Army. Other activities reflect Celtic Horizons Ltd undertaking development services for Caerphilly County Borough Council. Day to day maintenance costs have increased by 8.6% due to increased unit numbers.

40

Asset management The partnership contract between Celtic Horizons Ltd, United Welsh and Mears plc provides the asset management service. The Group invested £3.5m on major repairs to existing properties (2017 – £3.3m) and spent £5.7m (2017 – £5.2m) on day to day maintenance and cyclical repairs.

Development of new homes Details of the Group’s properties are set out in note 12 of the financial statements. During 2018 the Group spent £20.6m (2017 – £23.4m) on acquisition and development of social housing and received grant totalling £17.5m (2017 – £17.1m). The grant received includes S106 subsidy of £7.8m (2017 – £10.3m) to support this expenditure. At the end of the year the Group’s capital commitments in respect of new developments amounted to £21.3m, which will be funded by a combination of public subsidy and private finance.

At the end of the year the Group has 5,808 properties in management as set out in note 12c to the financial statements.

Capital structure Tangible fixed assets are financed as follows:

Treasury and funding Compliance with loan covenants is reported quarterly to the Board and an in depth treasury performance review and treasury strategy are presented to Board half yearly.

At the end of the year the Group had cash balances of £29.7m (2017 – £31.6m). The average monthly cash balance held during the year was £26.6m. Loans at the end of the year totalled £213.2m (2017 – £192.7m).

2018 2017

Social Housing Grant(SHG) and other grants 51% 52%

Private finance 42% 41%

Reserves 7% 7%

41

GROUP FINANCIAL SUMMARY 2018

£’0002017

£’0002016

£’000

Statement of comprehensive income

Turnover 35,897 31,343 29,105

Operating surplus 12,328 11,316 9,293

Surplus for the year 5,905 4,020 2,275

Statement of financial position

Property, plant and equipment 440,891 421,244 396,444

Investment properties 675 1,325 3,565

Investments 11,073 9,976 8,079

Net current assets 66,258 36,871 22,267

Creditors falling due after more than one year:

Pension scheme deficit recovery plan (2,287) (2,713) (2,968)

Social Housing Grant and other grants (259,498) (244,149) (229,274)

Loans and other creditors (220,700) (192,047) (171,626)

Share capital and reserves 36,412 30,507 26,487

FREE CASH FLOW STATEMENT2018

Group £’000

2018Association

£’000

2017Group £’000

2017Association

£’000Net cash generated from operating activities 18,599 18,320 14,162 14,359

Interest paid (7,843) (7,843) (7,713) (7,713)

Interest received 314 390 108 108

Adjustments for reinvestment in existing properties:

Component replacements (3,525) (3,525) (3,300) (3,300)

Purchase of other replacement fixed assets (762) (762) (20) (20)

(11,816) (11,740) (10,925) (10,925)

Cash and cash equivalents at the end of the year

6,783 6,580 3,237 3,434

Loans repaid (2,695) (2,695) (2,100) (2,100)

Free cash generated after loan repayments

4,088 3,885 1,137 1,334

42

General reserves represent the Group’s investment in housing properties that are not funded by grant and loans. The adequacy of the Group’s general reserves is determined by the Group’s long-term financial forecasts and are benchmarked against other similar sized housing associations.

Reserves are used:• To maintain a buffer against risk• To meet future liabilities, out of past and present income streams, e.g. major repairs• To satisfy the financial covenants of lenders• To financially support the quality of customer services at times of increasing

pressures on revenue expenditure, e.g. during high levels of price inflation• To financially support the Group’s development programme.• To fund interest and repayment of financing not covered by surpluses or refinancing.

The Group has general reserves at the year-end of £36.4m (2017 – £30.5m). This represents an increase on the previous year of 19%.

GROUP FINANCIAL PERFORMANCE INDICATORS

* Earnings before interest, tax, depreciation and amortisation.

Reserves statement

2018 2017 2016

Operating surplus as % of turnover 34% 36% 32%

Surplus as % of turnover 16% 13% 8%

Rental income loss from empty properties 1.1% 1.2% 1.2%

Uncollected rent as % of rental income 1.0% 1.1% 0.9%

EBITDA* as % debt 6% 6% 6%

Capital expenditure as % of turnover 82% 114% 123%

Gearing 67% 66% 66%

Interest cover 153% 159% 129%

Net additional properties 158 279 258

Our financial strength continues to support our work and provide us with the means to work constructively with our partners, providing value to them and our communities.

F I N A N C I A L S T A T E M E N T S

44

United Welsh Group

In our opinion the financial statements: • give a true and fair view, in

accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, of the state of the Group’s and the Association’s affairs as at 31 March 2018 and of the income and expenditure of the Group and the Association for the year then ended;

• comply with the requirements of the Co-operative and Community Benefit Societies Act 2014; and

• have been properly prepared in accordance with the Housing and Regeneration Act 2008 and the Accounting Requirements for Registered Social Landlords General Determination (Wales) 2015.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group and the Association in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Independent auditor’s report to United Welsh Housing Association

OpinionWe have audited the financial statements of United Welsh Housing Association for the year ended 31 March 2018 which comprise the statements of comprehensive income, statements of financial position, statements of cash flows and related notes, including the accounting policies in note 2.

45

United Welsh Group

Opinion on other matters prescribed by the Housing Association Circular 02/10 Internal Controls and Reporting (“the Circular”)In our opinion the Statement on Internal Controls on page 36:• provides the disclosures required

by the Circular; and• is not materially inconsistent

with the information which we have been made aware of from our audit work on the financial statements.

Matters on which we are required to report by exceptionUnder the Co-operative and Community Benefit Societies Act 2014 we are required to report to you if, in our opinion:• the Association has not kept proper

books of account; or• the Association has not maintained

a satisfactory system of control over its transactions; or

• the financial statements are not in agreement with the Association’s books of account; or

• we have not received all the information and explanations we need for our audit.

We have nothing to report in these respects.

Going concernWe are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects.

Other informationThe Board are responsible for the other information, which comprises the foreward, the strategic report and the governance report. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work, we have not identified material misstatements in the other information.

46

United Welsh Group

Board’s responsibilities As more fully explained in their statement set out on page 37 the Association’s Board are responsible for the preparation of financial statements which give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and the Association’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Association or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe our responsibilitiesThis report is made solely to the Association in accordance with section 87 of the Co-operative and Community Benefit Societies Act 2014 and, in respect of the reporting on corporate governance, on terms that have been agreed. Our audit work has been undertaken so that we might state to the Association those matters we are required to state to it in an auditor’s report and, in respect of the reporting on corporate governance, those matters we have agreed to state to it in our report, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association for our audit work, for this report, or for the opinions we have formed.

Victoria Sewellfor and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 3 Assembly SquareBritannia QuayCardiffCF10 4AX

3 July 2018

47

United Welsh Group

2018 2017

Statements of changesin reserves

GroupTotal

Reserves £’000

AssociationTotal

Reserves £’000

GroupTotal

Reserves £’000

AssociationTotal

Reserves £’000

Balance at beginning of year 30,507 30,668 26,487 26,535

Surplus from Statement of Comprehensive Income 5,905 5,933 4,020 4,133

Balance at end of year 36,412 36,601 30,507 30,668

Total reserves are solely comprised of the comprehensive income reserve for both the Association and Group.

Notes

2018 Group £’000

2018Association

£’000

2017Group £’000

2017Association

£’000

Turnover 3 35,897 33,207 31,343 31,143

Operating costs 3 (23,569) (21,626) (20,027) (19,834)

Operating surplus 12,328 11,581 11,316 11,309

Gain on disposal ofproperty, plant and equipment 985 985 57 57

Interest receivable 307 390 97 97

Interest and financing costs 10 (7,714) (7,714) (7,284) (7,284)

Movement in fair value ofinvestment properties 13 - - (165) (165)

Gift aid from subsidiary - 691 - 119

Surplus before tax 5,906 5,933 4,021 4,133

Tax on surplus 11 (1) - (1) -

Surplus for the year 5,905 5,933 4,020 4,133

Other comprehensive income - - - -

Total comprehensive income 5,905 5,933 4,020 4,133

Statements of comprehensive incomeFor the year ended 31 March 2018

48

United Welsh Group

Notes

2018 Group £’000

2018Association

£’000

2017Group £’000

2017Association

£’000

Fixed assets

Housing properties 12a 424,933 425,062 405,397 405,494

Other property, plant and equipment 12b 15,958 12,762 15,847 12,481

Investment properties 13 675 675 1,325 1,325

441,566 438,499 422,569 419,300

Investments: Homebuy and LCHO loans receivable 14 10,324 10,324 9,224 9,224

Investments: Other 15 749 749 752 752

11,073 11,073 9,976 9,976

Current assets

Debtors: amounts falling due within one year 16 38,193 38,801 7,049 7,917

Debtors: amounts falling due after one year 16 11,144 14,711 7,326 11,006

49,337 53,512 14,375 18,923

Stock 17 2,153 1,605 4,423 3,533

Cash and cash equivalents 29,661 28,968 31,590 31,132

81,151 84,085 50,388 53,588

Creditors: amounts falling due within one year 18 (14,893) (14,578) (13,517) (13,293)

Net current assets 66,258 69,507 36,871 40,295

Total assets less current liabilities 518,897 519,079 469,416 469,571

Creditors: amounts falling due after more than one year 19 (482,478) (482,478) (438,903) (438,903)

Provisions for liabilities and charges 11 (7) - (6) -

Net assets 36,412 36,601 30,507 30,668

Capital and reserves

Share capital 24 - - - -

Reserves 36,412 36,601 30,507 30,668

36,412 36,601 30,507 30,668

Statements of financial positionAs at 31 March 2018

The financial statements were approved by the Board on 28 June 2018 and signed on its behalf by:

G Sturges B Geere Chair Chair of Audit & Risk Committee

The notes on pages 51 to 78 form part of these financial statements.

49

United Welsh Group

Statements of Cash FlowsFor the year ending 31 March 2018

2018 Group £’000

2018Association

£’000

2017Group £’000

2017Association

£’000

Cashflow from operating activities

Surplus for the year 5,905 5,933 4,020 4,133

Adjustment for non-cash items:

Depreciation 5,915 5,745 6,286 6,112

Amortisation (1,987) (1,987) (1,881) (1,881)

Movement in fair value of investment properties - - 169 169

(Increase)/decrease in debtors (212) 161 (8) (514)

Increase/(decrease) in creditors 2,377 2,286 (46) (172)

Decrease/(increase) in stock 656 314 (1,204) (314)

Difference between pension costs charged in operating surplus and pension cashflows (474) (474) (304) (304)

Profit on disposal of fixed assets (985) (985) (57) (57)

Interest payable 7,714 7,714 7,284 7,284

Interest receivable (310) (387) (97) (97)

Cash inflow from operations 18,599 18,320 14,162 14,359

Cashflows from investing activities

Finance income received 314 390 108 108

Proceeds from sale of property, plant and equipment 1,635 1,635 403 403

Purchase of property, plant and equipment (14,618) (14,650) (17,782) (17,814)

Component replacements to existing properties (3,525) (3,525) (3,300) (3,300)

Purchaser's equity in properties held for sale 1,614 1,614 (2,463) (2,463)

Government grants received 8,070 8,070 5,279 5,279

Net acquisition of financial asset investments (2,419) (2,419) (570) (570)

Net cash outflow from investing activities (8,929) (8,885) (18,325) (18,357)

Net cash inflow/(outflow) before financing activities

9,670 9,435 (4,163) (3,998)

50

United Welsh Group

2018 Group £’000

2018Association

£’000

2017Group £’000

2017Association

£’000

Cashflows from financing activities

Finance costs paid (7,843) (7,843) (7,713) (7,713)

Other government funding (847) (847) 3,683 3,683

New loans (214) (214) 25,000 25,000

Repayment of borrowings (2,695) (2,695) (9,350) (9,350)

Net cash (outflow)/inflow from financing activities

(11,599) (11,599) 11,620 11,620

Net (decrease)/increase in cash and cash equivalents (1,929) (2,164) 7,457 7,622

Cash and cash equivalents at the beginning of the year 31,590 31,132 24,133 23,510

Cash and cash equivalents at the end of the year

29,661 28,968 31,590 31,132

Statements of Cash FlowsFor the year ending 31 March 2018

51

United Welsh Group

1. Legal status The Association is registered under the Co-operative and Community Benefit Societies Act 2014 and is a Registered Social Landlord. The Association has adopted charitable rules. The Association’s wholly owned subsidiaries, Harmoni Homes Ltd and Celtic Horizons Ltd are registered under the Companies Act 2006.

2. Principal accounting policies and key estimates and judgements

Basis of accountingThe financial statements are prepared in accordance with applicable Accounting Standards, specifically Financial Reporting Standard 102 (FRS102) in the United Kingdom and Republic of Ireland and the Statement of Recommended Practice Accounting for Registered Social Housing Providers 2014 (SORP 2014) and comply with the Accounting Requirements for Registered Social Landlords General Determination (Wales) 2015. The Group meets the definition of a Public Benefit Entity under FRS102. The financial statements have been prepared in Sterling on

the historical cost basis, except for the modification to a fair value basis for investment properties and certain financial assets as specified in the accounting policies below. Other than the Statement of Cash Flows, the financial statements are prepared under the accruals basis. The accounting policies are consistently applied from one financial year to another, subject to the changes required by FRS102.

Basis of consolidationThe consolidated accounts include the financial statements of United Welsh Housing Association Ltd and its subsidiaries, Celtic Horizons Ltd and Harmoni Homes Ltd made up to the 31 March 2018. The purchase method of accounting has been adopted.

Going concernAfter reviewing the Group’s forecasts and projections, the Board have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

For the year ended 31 March 2018

Notes to the consolidated financial statements

52

United Welsh Group

Critical accounting estimates and judgementsThe preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for income and expenditure during the year. The Group based its estimates and assumptions on parameters available at the time the financial statements were prepared.

Impairment of non-financial assetsSocial housing properties are sensitive to potential changes in value in use which may lead to impairment. In accordance with FRS102 the Association carries out an annual impairment test assessing the future value taking into account the current level of demand for properties, the level of void losses, projected discounted cash flows, and the ongoing investment in property maintenance and improvement.

Fair value of investment propertiesThe fair values of investment properties are sensitive to changes in market conditions therefore the Group’s investment properties are valued annually by an independent valuer and amended when necessary to reflect current estimates (note 13).

TurnoverTurnover represents rental and service charge income, sundry housing services and government grants receivable. Revenue for rent and service charges receivable is

recognised in line with the letting period, net of losses from voids, from the point at which properties become available for letting. Rent and service charge losses from bad debts are included within operating costs. Feed-in tariff income receivable is recognised at the point the supply is provided.

Property, plant & equipmentHousing and other buildings (and the components) held for social benefit are shown at historical cost, less accumulated depreciation. Directly attributable costs, such as land costs, contractor payments and architects’ fees are capitalised at cost. Management expenses are allocated to the costs of schemes under construction to the extent that they represent incremental costs. Pre-contract costs are included in debtors and added to housing properties when the scheme development starts on site. The costs of improvement to existing housing properties are included if the improvements increase rental income, reduce future maintenance costs or significantly extend the life of the property. Where this is the case the full cost of each of the components is capitalised. When schemes are purchased requiring refurbishment, the costs of these refurbishments are fully capitalised.

Other fixed assets are held at historical cost, less accumulated depreciation.

Freehold land and assets in the course of construction are not depreciated.

53

United Welsh Group

Social Housing Grant, Housing Finance Grant and other capital grantsAll government grants initially appear as creditors in the Statement of Financial Position at the fair value of the sum receivable. Grants are amortised on a straight line basis over the life of the asset whose purchase they support, unless they are received in respect of the provision of properties under the Homebuy or LCHO schemes, in which case grants are only taken to the Statement of Comprehensive Income at the point the loan is redeemed. Social Housing Grant (SHG) and Housing Finance Grant (HFG) are receivable from the Welsh Government. SHG is received in full when a property is developed or acquired. HFG is received over a 30 year period with interest receivable from the Welsh Government, on the total capital value of the grant, over that period. Where land or buildings are acquired at below market value the carrying value reflects the fair value of the asset received, with the subsidy implicit in the arrangement deemed as grant and added to the grant creditor.

SHG and HFG are repayable in the event of a related property being sold and the grant not being re-utilised within three years. Un-utilised SHG is shown under creditors as ‘recycled capital grant fund’ and ‘disposal proceeds fund’ (notes 18, 19, 22 and 23).

Grant received in respect of revenue costs, or from a non-government source, is credited to the Statement of Comprehensive Income in the period in which those costs are incurred.

Homebuy and other LCHO loans receivableThe loan to the purchaser of a property purchased under the Homebuy initiative or LCHO scheme is treated as a fixed asset investment.

The Group retains equity shares ranging between 22% and 50% in homes purchased under the Homebuy and LCHO schemes. Where a property has been acquired by the Group at below market value, the difference between cost and market value at the point of purchase is deemed as grant.

The investment in Homebuy and LCHO is held on the Statement of Financial Position at cost (the initial value of the Association’s equity share). On sale of the property the Association will receive a proportion of the sale proceeds equal to the Association’s (percentage) equity share in the property. Grant received on Homebuy and LCHO schemes is recyclable on sale of these properties.

StockStock represents the value of the purchaser’s equity share in properties currently held for sale and the cost of properties for sale under construction.

54

United Welsh Group

DepreciationThe Group charges depreciation over the expected useful economic lives of assets on a straight line basis (unless indicated otherwise) as follows:

Freehold properties(a) Residential Buildings: Lives:

New build structure 150 years from date of construction

Rehabilitated properties structure

120 years from date of rehabilitation

(b) Non-Residential Buildings:

Office Buildings 60 years from date of construction

Other non-residential Buildings

120 years from date of construction

Leasehold buildings50 years from the commencement of the lease or over the length of the lease (whichever is shorter)

Individual componentsKitchens 15 years

Bathrooms 25 years

Heating systems 30 years

Boilers 15 years

Windows 30 years

Doors 15 years

Roofs 60 years

Other 15 to 30 years

Photovoltaic Panels 25 years

Other fixed assets

Motor vehicles 25% reducing balance

Fixtures, furniture and equipment 5 – 20 years

Computer equipment and software 4 - 6 years

Impairment of propertiesWhere it is recognised that there is a permanent diminution in value of any property, the full reduction in value is written off to the Statement of Comprehensive Income in the year in which the diminution is recognised. Investment properties Properties held for the purpose of generating revenue or capital appreciation are classified as investment properties and held at fair value with changes in fair value taken directly to the Statement of Comprehensive Income.

Other InvestmentsThe Group’s interest in UK Treasury bonds is held at amortised cost.

Investment in subsidiary These are the financial statements of the Group and the Association only. Separate financial statements are produced for the subsidiaries Celtic Horizons Ltd and Harmoni Homes Ltd. Investment in both subsidiaries is carried at cost less impairment.

Debtors and creditorsDebtors are recognised initially at transaction price less attributable transaction costs. Creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost less any impairment losses in the case of rent debtors. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal

55

United Welsh Group

business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument.

Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits.

Leases and similar hire purchase agreements Where the Group leases property, plant or equipment (either as lessee or lessor) and there is a transfer of substantially all of the risks and rewards of ownership, the lease is classified as a finance lease. All other leases are classified as operating leases. Leased assets are held by the lessor at an amount equal to the lower of their fair value and the present value of the minimum lease payments, with an equivalent finance lease liability recognised. The Group recognises lease income and costs relating to operating leases in the statement of comprehensive income on a straight-line basis over the term of the lease, subject to any adjustment for lease incentives or onerous lease contracts.

Housing and other loans classified as basic financial instrumentsInterest-bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest-bearing loans are stated at amortised cost using the effective interest method, less any impairment losses.

PensionsThe Group participates in the centralised Social Housing Pension Scheme (SHPS) Defined Benefit Scheme which is a final salary scheme. It is not possible to identify the Group’s underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, the scheme is accounted for as if it were a defined contribution scheme. As a result, the amount charged in the Consolidated Statement of Comprehensive Income represents the contributions payable to the scheme during the accounting period (note 30) adjusted for any change in the Group’s liability in respect of obligations under the SHPS Defined Benefit Scheme past service deficit recovery plan. The Group’s current SHPS Defined Benefit Scheme deficit recovery plan liability appears in creditors, reducing as the obligation is settled.

Corporation taxThe Association is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the charity is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 Corporation Tax Act 2010 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes.

56

United Welsh Group

Celtic Horizons Ltd and Harmoni Homes Ltd are subject to Corporation Tax. The Corporation Tax disclosures are included in note 11.

Value added taxThe Association charges Value Added Tax (VAT) on some of its income and is able to recover part of the VAT it incurs on expenditure. The financial statements include VAT to the extent that it is suffered by the Association and not recoverable from HM Revenue and Customs. VAT payable or recoverable at the year end is included as a current liability or asset as appropriate.

Celtic Horizons Ltd and Harmoni Homes Ltd are subject to VAT.

Deferred taxThe charge for taxation is based on the profit or loss for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the Statement of Financial Position date, except as otherwise required by Section 29 of FRS102.

Related Party transactionsSee notes 7 and 8 for information relating to key management personnel and related party transactions. In accordance with paragraph 33.1A of FRS102, transactions between the Group’s wholly owned subsidiaries, Celtic Horizons Ltd, Harmoni Homes Ltd and other members of the Group have not been separately disclosed in these financial statements.

57

United Welsh Group

GROUP 2018 2017

Social Housing

Turnover £’000

Operating costs

£’000

Operating surplus £’000

Turnover £’000

Operating costs

£’000

Operating surplus

£’000(note 4) (note 5)

Social housing lettings 32,261 (21,150) 11,111 30,049 (19,445) 10,604

TOTAL 32,261 (21,150) 11,111 30,049 (19,445) 10,604

Non social housing activities

Lettings 472 (91) 381 594 (105) 489

Other activities 3,164 (2,328) 836 700 (477) 223

TOTAL 35,897 (23,569) 12,328 31,343 (20,027) 11,316

ASSOCIATION 2018 2017

Social Housing

Turnover £’000

Operating costs

£’000

Operating surplus £’000

Turnover £’000

Operating costs

£’000

Operating surplus

£’000(note 4) (note 5)

Social housing lettings 32,261 (21,332) 10,929 30,049 (19,504) 10,545

TOTAL 32,261 (21,332) 10,929 30,049 (19,504) 10,545

Non social housing activities

Lettings 472 (91) 381 594 (105) 489

Other activities 474 (203) 271 500 (225) 275

TOTAL 33,207 (21,626) 11,581 31,143 (19,834) 11,309

3. Turnover, operating costs and operating surplus

58

United Welsh Group

4. Group and Association - income from social housing lettings

5. Group and Association - expenditure on social housing lettings

2018 2017

TURNOVER

Generalneeds

housing £’000

Supportedhousing

£’000Total

£’000Total

£’000

Rents receivable net of voids 21,683 4,107 25,790 24,308

Service charge income 2,510 663 3,173 3,129

Amortisation of Social Housing Grant and other grants 1,598 389 1,987 1,876

Grant receivable - 1,311 1,311 736

Turnover from social housing lettings 25,791 6,470 32,261 30,049

Rent losses from voids (memorandum note) (250) (83) (333) (319)

2018 2017

GROUP

Generalneeds

housing £’000

Supportedhousing

£’000Total

£’000Total

£’000

Management costs 3,207 2,296 5,503 4,577

Service charge costs 2,607 377 2,984 2,719

Development administration 456 189 645 731

Depreciation 5,227 898 6,125 6,038

Rent losses from bad debts 170 35 205 141

Day to day maintenance and cyclical repairs 4,565 1,123 5,688 5,239

Operating costs on social housing lettings 16,232 4,918 21,150 19,445

Operating surplus on social housing lettings 9,559 1,552 11,111 10,604

59

United Welsh Group

6. Auditor’s Remuneration

2018 2017

Group£’000

Association£’000

Group£’000

Association£’000

Audit of financial statements 30 24 27 25

Tax advisory fees 20 10 10 10

50 34 37 35

5. Group and Association - expenditure on social housing lettings

During the year £3.5m of major repairs expenditure was capitalised (2017 - £3.3m).

2018 2017

ASSOCIATION

Generalneeds

housing £’000

Supportedhousing

£’000Total

£’000Total

£’000

Management costs 3,207 2,296 5,503 4,577

Service charge costs 2,607 377 2,984 2,719

Development administration 566 189 755 731

Depreciation 5,227 898 6,125 6,038

Rent losses from bad debts 170 35 205 141

Day to day maintenance and cyclical repairs 4,637 1,123 5,760 5,298

Operating costs on social housing lettings 16,414 4,918 21,332 19,504

Operating surplus on social housing lettings 9,377 1,552 10,929 10,545

60

United Welsh Group

7. Group and Association - key management personnel

8. Interests and related party transactions

2018£’000

2017£’000

Emoluments (including pension contributions and benefits in kind) 362 425

Emoluments (excluding pension contributions) paid to the highest paid senior employee

126 105

The remuneration paid to the senior executives was:

No remuneration was paid to non-employee members of the Board during the year (2017 - £Nil). The emoluments of non-employee Board members and senior employees, including pension contributions, were in the following ranges:

During the year the Association provided rented accommodation to three Board members who were tenants of the Association and charged rent to those members on the Association’s standard terms. Board members who are tenants are unable to use their position to their advantage.

The Group Chief Executive is an ordinary member of the pension scheme and no special terms apply. The contribution for the year in respect of the Group Chief Executive’s pension fund amounted to £11,941.

2018No.

2017No.

£Nil 11 12

£1 - £90,000 - -

£90,001 - £100,000 - -

£100,001 - £110,000 - 3

£110,001 - £120,000 2 1

£120,001 - £130,000 - -

£130,001 - £140,000 1 -

61

United Welsh Group

9. Employees and employee costs

10. Group and Association - interest payable and similar charges

2018 2017

Group£’000

Association£’000

Group£’000

Association£’000

Wages and salaries 8,313 4,950 7,542 4,179

Social security costs 769 467 696 394

Pension costs 252 235 247 230

9,334 5,652 8,485 4,803

2018 2017

GroupNo.

AssociationNo.

GroupNo.

AssociationNo.

The average monthly number of staff (full time equivalent) during the year

310 168 281 143

The actual number of staff at end of year 329 179 301 156

2018£’000

2017£’000

On loans repayable by instalments 3,604 3,489

Finance charge in respect of the pension deficit 38 64

On loans repayable other than by instalments 4,187 4,114

Capitalised interest (115) (383)

7,714 7,284

There were no amounts payable to the pension scheme at either the beginning or end of the year. During the year Celtic Horizons Ltd continued to provide the labour associated with the delivery of the responsive, cyclical and planned maintenance service to United Welsh in partnership with Mears.

62

United Welsh Group

As referred to in the accounting policy note 2, the Association is not subject to corporation tax. The group tax charge is set out below:

a) Analysis of the tax charge

11. Corporation tax

2018Group£’000

2017Group£’000

Current tax - UK Corporation tax on profit - -

Deferred tax - Deferred tax charge 1 1

1 1

2018Group£’000

2017Group£’000

Surplus before taxation 5,906 4,021

Effects of: Tax using the UK corporation tax rate of 19% (2017:20%) (1,128) (804)

Non-taxable surpluses (due to charitable status) 996 779

Gift aid relief 131 24

Tax on surplus (1) (1)

Reductions in the UK corporation tax rate from 20% (effective from 1 April 2015) to 19% (effective from 1 April 2017) was substantively enacted on 26 October 2015. A further reduction to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the company’s future current tax charge accordingly. The deferred tax liability at 31 March 2018 has been calculated based on these rates.

2018 2017

Group£’000

Association£’000

Group£’000

Association£’000

Losses - - - -

Fixed asset timing differences 7 - 6 -

Other short term timing differences - - - -

Balance at end of year 7 - 6 -

b) Deferred tax liability

Provided and unprovided deferred tax comprises the following:

Reconciliation of effective tax rate

63

United Welsh Group

12a. Housing properties

GROUP

Social Housing

properties held for letting

£’000

Housing properties in the course of construction

£’000

Total social housing

properties£’000

Cost or Valuation

At beginning of year 416,815 16,860 433,675

Transferred on completion 16,148 (16,148) -

Additions during the year 4,642 20,591 25,233

Components replaced (433) - (433)

At end of year 437,172 21,303 458,475

Depreciation

At beginning of year 28,278 - 28,278

Charge for the year 5,697 - 5,697

Components replaced (433) - (433)

At end of year 33,542 - 33,542

Net book value

At end of year 403,630 21,303 424,933

At beginning of year 388,537 16,860 405,397

64

United Welsh Group

12a. Housing properties

ASSOCIATION

Social Housing

properties held for letting

£’000

Housing properties in the course of construction

£’000

Total social housing

properties£’000

Cost or Valuation

At beginning of year 416,912 16,860 433,772

Transferred on completion 16,148 (16,148) -

Additions during the year 4,674 20,591 25,265

Components replaced (433) - (433)

At end of year 437,301 21,303 458,604

Depreciation

At beginning of year 28,278 - 28,278

Charge for the year 5,697 - 5,697

Components replaced (433) - (433)

At end of year 33,542 - 33,542

Net book value

At end of year 403,759 21,303 425,062

At beginning of year 388,634 16,860 405,494

Properties includes land with a carrying value of £79.0m. The additions under housing properties held for letting comprise improvements to existing properties of £4.7m (2017 - £4.4m) and includes replacement of components of £3.5m (2017 - £3.3m).

65

United Welsh Group

12b. Other property, plant and equipment

GROUPNon-

housing properties

£’000

Scheme equipment

£’000

Photovoltaic panels£’000

Vehicles & office

equipment£’000

2018 Total

£’000

Cost or Valuation

At beginning of year 11,420 3,533 4,329 1,548 20,830

Additions during the year 6 588 - 195 789

Components replaced (2) (25) - - (27)

At end of year 11,424 4,096 4,329 1,743 21,592

Depreciation

At beginning of year 1,156 1,633 899 1,295 4,983

Charge for the year 171 220 173 108 672

Components replaced (1) (20) - - (21)

At end of year 1,326 1,833 1,072 1,403 5,634

Net book value

At end of year 10,098 2,263 3,257 340 15,958

At beginning of year 10,264 1,900 3,430 253 15,847

66

United Welsh Group

12b. Other property, plant and equipment

ASSOCIATIONNon-

housing properties

£’000

Scheme equipment

£’000

Photovoltaic panels£’000

Vehicles & office

equipment£’000

2018 Total

£’000

Cost or Valuation

At beginning of year 11,420 3,533 76 1,548 16,577

Additions during the year 6 588 - 195 789

Components replaced (2) (25) - - (27)

At end of year 11,424 4,096 76 1,743 17,339

Depreciation

At beginning of year 1,156 1,633 12 1,295 4,096

Charge for the year 171 220 3 108 502

Components replaced (1) (20) - - (21)

At end of year 1,326 1,833 15 1,403 4,577

Net book value

At end of year 10,098 2,263 61 340 12,762

At beginning of year 10,264 1,900 64 253 12,481

67

United Welsh Group

12c. Housing and other properties

2018 2017

Group£’000

Association£’000

Group£’000

Association£’000

Properties at cost:

Freehold 423,238 423,367 403,185 403,282

Long leasehold 9,050 9,050 9,672 9,672

Short leasehold 2,743 2,743 2,804 2,804

435,031 435,160 415,661 415,758

Represented by:

Social housing properties 424,933 425,062 405,397 405,494

Non-housing properties 10,098 10,098 10,264 10,264

435,031 435,160 415,661 415,758

2018No.

2017No.

Properties owned and managed

General needs housing properties in management 4,630 4,503

Supported housing bed spaces - agency managed 751 746

Supported housing bed spaces - directly managed 126 119

Homebuy/LCHO 236 218

Other properties 65 64

5,808 5,650

Fixed charges have been granted on the Association’s housing properties to secure SHG.

68

United Welsh Group

2018£’000

At beginning of year 1,325

Disposal during the year (650)

At end of year 675

13. Group and Association: Investment properties

The existing freehold investment properties were valued by an independent valuer with a recognised and relevant professional qualification in March 2018. Overall there is no movement in the fair value.

Homebuy and other LCHO loans receivable represent the initial value of the Association’s remaining equity share in properties funded under the Homebuy initiative and other equity share Low Cost Home Ownership (LCHO) schemes.

This represents the Group and Association’s investment in UK Government Bonds (4.5% 2042 issue) with a nominal value of £621,400. The Gilt is a basic financial instrument held at amortised cost. The Association owns 100% of the ordinary share capital of Celtic Horizons Ltd and Harmoni Homes Ltd, companies incorporated in Wales. The principal activity of Celtic Horizons Ltd is associated housing activities and the principal activity of Harmoni Homes Ltd is property development. The cost of the Association’s investment in each entity is £1.

2018

COSTHomebuy

£’000LCHO £’000

Total £’000

At beginning of year 1,563 7,661 9,224

Additions during the year - 1,275 1,275

Disposals during the year (59) (116) (175)

1,504 8,820 10,324

14. Group and Association - Investments: Homebuy and LCHO loans receivable

2018Group£’000

2017Group£’000

Value of Gilt 749 752

15. Group and Association - other investments

69

United Welsh Group

16. Debtors

Housing Finance Grant is paid by the Welsh Government as a contribution towards the costs of housing assets. The grant is payable over a period of 30 years. Housing Finance Grant of £202,000 is due within one year and £11.1m is due in over one year.

At the end of the year the Association had invested £4.3m (note 12b) in photovoltaic panels for the purpose of letting under lease contracts. Fees during the year from lease contracts amounted to £234,000 (2017 - £240,000). The investment in lease contracts in the Association includes £3.7m (2017 - £3.8m) of which £113,000 is due within one year and £3.6m is receivable in over one year. These assets are leased to the Association’s subsidiary Celtic Horizons Ltd.

2018 2017

Group £’000

Association £’000

Group £’000

Association £’000

Arrears of tenant rent and service charges 1,315 1,315 1,108 1,108

Provision for bad and doubtful debts (1,038) (1,038) (817) (817)

277 277 291 291

Other rental debtors 262 262 261 261

Other debtors and prepayments 35,086 34,757 5,279 5,125

Loans under the Empty Homes Initiative 131 131 172 172

Housing Finance Grant 11,346 11,346 7,456 7,456

Interest reserve fund cash deposit 2,235 2,235 916 916

Intercompany account - 824 - 916

Finance lease contracts - 3,680 - 3,786

49,337 53,512 14,375 18,923

Amounts falling due after one year included above:

Housing Finance Grant 11,144 11,144 7,326 7,326

Finance lease contracts - 3,567 - 3,680

11,144 14,711 7,326 11,006

70

United Welsh Group

2018 2017

GROUP Completed£’000

Under construction

£’000 Total £’000

Completed £’000

Under construction

£’000Total

£’000

LCHO held for sale 1,605 - 1,605 1,999 1,220 3,219

Properties held for sale 548 - 548 314 890 1,204

2,153 - 2,153 2,313 2,110 4,423

ASSOCIATION Completed£’000

Under construction

£’000 Total £’000

Completed £’000

Under construction

£’000Total

£’000

LCHO held for sale 1,605 - 1,605 1,999 1,220 3,219

Properties held for sale - - - 314 - 314

1,605 - 1,605 2,313 1,220 3,533

17. Stock

71

United Welsh Group

19. Group and Association – creditors: amounts falling due after more than one year

2018 2017

Group £’000

Association £’000

Group £’000

Association £’000

Maintenance and other supplies 984 1,003 728 728

Capital expenditure on housing properties 2,266 1,932 2,491 2,491

Housing loans (note 20) 1,810 1,810 4,297 4,297

Social Housing Grant and other grants (note 21) 1,999 1,999 1,899 1,899

Other government funding 3,157 3,157 806 806

Pension scheme deficit recovery plan 426 426 410 410

Accruals and deferred income 2,036 2,036 1,840 1,745

Prepayments of rents and service charges 554 554 639 639

Recycled Capital Grant fund (note 22) 312 312 164 164

Disposal Proceeds Fund (note 23) 175 175 - -

Other capital creditors 1,051 1,051 140 11

Tax and social security 123 123 103 103

14,893 14,578 13,517 13,293

2018 £’000

2017 £’000

Housing loans (note 20) 209,321 186,463

Social Housing Grant and other grants (note 21) 259,498 244,149

Other government funding 1,255 4,039

Pension scheme deficit recovery plan 2,287 2,713

Recycled Capital Grant fund (note 22) 196 275

Disposal Proceeds Fund (note 23) 105 280

Other long term creditor 809 39

Deferred creditor 9,007 945

482,478 438,903

18. Creditors: amounts falling due within one year

Housing loans are held at amortised cost and are secured by fixed charges on housing properties.

72

United Welsh Group

20. Group and Association - housing loans 2018 £’000

2017 £’000

Loans repayable by instalments fall due as follows:

In five years or more 95,333 97,663

Between two and five years 7,247 7,128

Between one and two years 2,193 1,814

104,773 106,605

In one year or less 1,882 4,635

106,655 111,240

Loans repayable other than by instalments fall due as follows:

In five years or more 99,500 74,500

Between two and five years 7,000 7,000

106,500 81,500

Total housing loans 213,155 192,740

Amortised costs due within one year (72) (338)

Amortised costs due after one year (1,952) (1,642)

Total net loans 211,131 190,760

The interest rates are between 1.96% and 11.21% for fixed rate loans and between 0.25% and 2.00% (plus 3 Month LIBOR) for variable rate loans.

73

United Welsh Group

2018 £’000

2017 £’000

At beginning of year 246,048 231,078

Grant amortised during the year (1,987) (1,881)

Amortisation credit written back on disposal - 5

Grant receivable 17,505 17,118

Grant taken to income on disposal - (40)

Grant transferred to Recycled Grant Fund (Note 22) (69) (127)

Grant transferred to Disposals Proceeds Fund (Note 23) - (105)

At end of year 261,497 246,048

Amount due within one year (Note 18) 1,999 1,899

Amount due after one year (Note 19) 259,498 244,149

At end of year 261,497 246,048

2018 £’000

2017 £’000

At beginning of year 439 312

Grant recycled in the year (Note 21) 69 127

At end of year 508 439

Amount due for repayment to Welsh Government within one year (Note 17) 312 164

Amount due for repayment to Welsh Government after one year (Note 18) 196 275

2018 £’000

2017 £’000

At beginning of year 280 175

Grant recycled in the year - 105

At end of year 280 280

Amount due for repayment to Welsh Government within one year (Note 18) 175 -

Amount due for repayment to Welsh Government after one year (Note 19) 105 280

Total Social Housing Grant received to date is £273,838,000 (2017 £256,402,000).

21. Group and Association - Social Housing Grant and other grants

22. Group and Association - Recycled Capital Grant Fund

23. Group and Association: Disposal Proceeds Fund

74

United Welsh Group

2018 £

2017 £

Shares of £1 each fully paid:

At beginning of year 27 34

Issued during the year for cash 3 -

Cancelled during the year (4) (7)

At end of year 26 27

24. Group and Association - share capital

25. Obligations under leases

2018 £’000

2017 £’000

Within one year 113 106

Between two and five years 521 491

Over five years 3,046 3,189

3,680 3,786

2018 £’000

2017(restated)

£’000

Within one year 2,757 2,639

Between two and five years 1,301 1,416

Over five years 4,864 5,135

8,922 9,190

Shareholders have no equity interest in the Association. There are voting rights attached to the shares. The shares carry no rights to dividend payments or distribution on winding up and there is no provision for redemption. Shares cancelled are written back to reserves.

Finance lease agreements with the Association as lessorThe Association leases solar PV generators to its subsidiary Celtic Horizons Ltd under a finance lease. Future minimum rentals under non-cancellable finance leases are as follows:

Operating lease agreements with the Group as lessorThe Association leases its housing stock under various forms of tenancy, all of which allow the tenant to terminate the agreement on 28 days notice. Additionally, the Association leases some non-housing properties to third parties for uses that benefit the local community and some retail and office properties under standard commercial leases. The operating leases have remaining terms of between 1 and 29 years. Future minimum rentals receivable under operating leases are as follows:

75

United Welsh Group

2018 2017

Group £’000

Association £’000

Group £’000

Association £’000

Contracted less certified 21,258 4,016 14,931 13,487

26. Group and Association - capital commitments

27. Group and Association - contingent liabilitiesThere were no contingent liabilities at either the beginning or the end of the year.

28. Post balance sheet eventsThere were no events requiring reporting between the balance sheet date and the date on which these financial statements were approved.

29. Group informationUnited Welsh Housing Association is the parent of both Celtic Horizons Ltd and Harmoni Homes Ltd, holding 100% of the ordinary share capital of both entities. All entities are incorporated in Great Britain and registered in England and Wales. Celtic Horizons Ltd principal activity is the provision of associated housing services and Harmoni Homes Ltd principal activity is property development.

30. Group and Association pension costsThe United Welsh Group participates in two UK defined benefit pension schemes. The Social Housing Pension Scheme (SHPS), a multi-employer final salary scheme which provides benefits to some 500 non-associated employers and The Growth Plan a multi-employer scheme which provides benefits to some 1,300 non-associated participating employers. It is not possible for the Group to obtain sufficient information to enable it to account for the schemes as defined benefit schemes. Therefore it accounts for the schemes as defined contribution schemes.

The capital commitments will be funded by a combination of SHG, other grants and private finance.

76

United Welsh Group

30. Group and Association pension costs (continued)

The schemes are subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator and Technical Actuarial Standards issued by the Financial Reporting Council, sets out the framework for funding defined benefit occupational pension schemes in the UK.

The schemes are classified as a ‘last-man standing arrangement’. Therefore the Group is potentially liable for other participating employers’ obligations if those employers are unable to meet their share of the scheme deficit following withdrawal from the scheme. Participating employers are legally required to meet their share of the scheme deficit on an annuity purchase basis on withdrawal from the scheme.

SHPSA full actuarial valuation for the SHPS scheme was carried out with an effective date of 30 September 2014. This actuarial valuation was certified on 23 November 2015 and showed assets of £3,123m, liabilities of £4,446m and a deficit of £1,323m. To eliminate this funding shortfall, the trustees and the participating employers have agreed that additional contributions (Tier 4) will be paid, in combination from all employers, to the scheme as follows:

Tier 11 April 2016 to 30 September 2020:

£40.6m per annum(increasing by 4.7% each year on 1st April)

Tier 21 April 2016 to 30 September 2023:

£28.6m per annum(increasing by 4.7% each year on 1st April)

Tier 31 April 2016 to 30 September 2026:

£32.7m per annum(increasing by 3.0% each year on 1st April)

Tier 41 April 2016 to 30 September 2026:

£31.7m per annum (increasing by 3.0% each year on 1st April)

The scheme’s previous valuation was carried out with an effective date of 30 September 2011; this valuation was certified on 17 December 2012 and showed assets of £2,062m, liabilities of £3,097m and a deficit of £1,035m. To eliminate this funding shortfall, payments consisted of the Tier 1, 2 & 3 deficit contributions.

77

United Welsh Group

30. Group and Association pension costs (continued)

Growth PlanA full actuarial valuation for the Growth Plan scheme was carried out at 30 September 2011. This valuation showed assets of £780m, liabilities of £928m and a deficit of £148m. To eliminate this funding shortfall, the Trustee has asked the participating employers to pay additional contributions (Series 1) to the scheme as follows:

1 April 2013 to 30 September 2023: £13.9m per annum(increasing by 3% each year on 1st April)

A full actuarial valuation for the scheme was carried out at 30 September 2014. This valuation showed assets of £793m, liabilities of £970m and a deficit of £177m. To eliminate this funding shortfall, the Trustee has asked the participating employers to pay additional contributions (Series 2) to the scheme as follows:

1 April 2016 to 30 September 2025: £12.9m per annum(increasing by 3% each year on 1st April)

1 April 2016 to 30 September 2028: £0.54m per annum(increasing by 3% each year on 1st April)

The recovery plan contributions are allocated to each participating employer in line with their estimated share of the Series 1 and Series 2 scheme liabilities.

Where the schemes are in deficit and where the Group has agreed to a deficit funding arrangement, the Group recognises a liability for this obligation. The amount recognised is the net present value of the deficit reduction contributions payable under the agreement that relates to the deficit. The present value is calculated using the discount rate detailed in these disclosures. The unwinding of the discount rate is recognised as finance costs.

2018£’000

2017£’000

SHPS 2,692 3,099

Growth Plan 21 24

2,713 3,123

Present value of provision

78

United Welsh Group

2018 £’000

2017 £’000

At beginning of year 3,123 3,363

Unwinding of the discount factor (interest expense) 38 64

Deficit contribution paid (410) (395)

Impact of any change in assumptions (38) 91

Increase in deficit - -

At end of year 2,713 3,123

At end of year 2,713 3,123

2018 £’000

2017 £’000

Interest expense 38 64

Impact of any change in assumptions (38) 91

Increase in deficit - -

Contributions paid 252 247

Costs recognised in the Statement of Comprehensive Income 252 402

2018 % per

annum

2017 % per

annum

Rate of discount - SHPS 1.72 1.33

Rate of discount - Growth Plan 1.71 1.32

30. Group and Association pension costs (continued)

Reconciliation of opening and closing provisions

The discount rates shown above are the equivalent single discount rates which, when used to discount the future recovery plan contributions due, would give the same results as using a full AA rated corporate bond yield curve to discount the same recovery plan contributions.

Comprehensive income impact

Assumptions

C O N T A C T U S :

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