The directors present the strategic report for the year ended 31 March 2024.
In the year to 31st March 2024 Care Housing Association Limited can report upon a profitable year with relatively healthy growth. This year Care Housing Association Limited acquired one additional four-person property (Penistone Road) using reserves, and leased a further five buildings/sites, to be occupied by 51 tenants. Of the 55 new tenancies, 43 are single-person accommodation across three sites, with the remaining 8 in 3 shared houses.
At 31st March 2024 there were four hundred and thirty seven units in Care Housing Association Limited, of which sixty three were owned. The below ratios (comparatives have been restated) are monitored on a quarterly basis to ensure key areas within the company are maintained at the required level deemed appropriate by the board.
Gross profit
Gross profit stands at 37.15% which is a increase from 31.17% in 2023. Purchased properties have generated a higher margin but also this is consistent with historical years prior to 2023.
Gearing ratio
The gearing ratio was 34.27% down from 36.60% in 2023. This is within the acceptable range of Care Housing Association Limited's level of gearing. This ratio is calculated using capital employed. As mentioned in the VFM disclosures, high interest rates have resulted in the gearing not reducing to the same extent as in prior years.
Return on capital employed
Return on capital employed is 7.42% which is a increase from 3.14% in 2023. The ratio has increased due to the increased profit returned on a fairly stable capital employed.
Current ratio
The current ratio is 1.58 which has decreased from 2.19 in 2023, liquidity is positive in the company but the lowest it has been for a number of years. Significant investment in a wide range of areas is partly the reason.
Structure, governance and management
Care Housing Association Limited is governed by its Memorandum and Articles of Association dated 17th March 2017 on companies house. Care Housing Association is run by its CEO with strategic decisions overseen by the board. The board usually consists of six directors, with no upper limit and a quorate requirement of two directors.
At each annual general meeting one-third of the directors or, if their number is not three or a multiple of three, the number nearest to one-third, must retire from office. If there is only one director, he or she must retire.
The directors to retire by rotation shall be those who have been longest in office since their last appointment. If any directors became or were appointed directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.
If a director is required to retire at an annual general meeting by a provision of the Articles the retirement shall take effect upon the conclusion of the meeting.
The Articles dictate that no director may stand for re-election more than three times and no director may remain in office (with or without retirement and re-election) for an aggregate period of more than ten (10) years. However, the National Housing Federation Code of Conduct 2020, which has been adopted by the board, require directors to remain in office for no longer than 6 years, unless there is a valid business case for a years extension, up to 7 years.
The supported housing sector has several risks relating to the capital and revenue funding models deployed. In terms of capital, there is limited public funding available to enable sufficient investment in new homes to meet the continued and growing demand for services. The Homes England funding regime does not work at scale for specialised supported housing, which typically requires 70%+ of funding to ensure providers are able to meet their regulatory responsibilities around rent setting. Likewise, although NHS England do make capital available for specialist projects, it is a finite amount and meets only a fraction of the housing demand.
Although private capital is more readily available, the market is in a period of transition due to high-profile failings from private capital investors over the previous decade, increasing return expectations driven by rising interest rates, and a lack of confidence in the long-term sustainability of the model. In addition, construction costs have increased significantly higher than inflation, and so the costs of delivering new homes, and the subsequent increasing rent levels, are making it more difficult to deliver homes which are financially sustainable for housing providers.
Despite the challenges in delivering new homes, the Association still retains ambitious growth targets. However, this must be balanced with the need to undertake sufficient due diligence on all parties (care providers, local authorities, developers, and contractors) and ensure that our homes retain the appropriate level of quality and sustainability.
April 2024 saw the introduction of revised consumer standards and delivered greater powers for the Regulator of Social Housing. This has led to greater expectations around quality, safety, and ensuring tenants have appropriate means of engagement with their landlord. Care backs the move to raise standards further but must also be conscious of the resourcing and practical implications of meeting the standards. Other legislative changes include the introduction of the Supported Housing (Regulatory Oversight) Act 2023, which will see the introduction of a licensing system for supported housing providers and will look to introduce minimum standards for care and support. The Association may need to adapt its practices and ensure that and adaptation is resourced adequately.
The Board itself has remained steady and consistent throughout the year, which has helped address a number of long-standing key risks and mitigate to the protect the future of the Association. The staff team has grown further, with the introduction of key staff in asset management and finance. The increased capacity and experience of the team will help to meet some of the legislative and regulatory challenges, and also equip the Association well to continue to grow in a sustainable way. Staff retention and morale remains high, as demonstrated in the result of an annual staff survey.
Objectives and activities
- Relieving aged, disabled (whether physically or mentally) or chronically sick people including (without limitation), individuals with learning difficulties and other vulnerable groups of persons including offenders who are in need by providing and managing social housing, providing and managing housing and other activities and services connected with or incidental to the provision of social housing primarily in the North West of England;
- Promoting social inclusion by providing and managing social housing, providing and managing housing and other activities and services connected with or incidental to the provision of social housing in each case for the benefit of people at risk of exclusion from society as a result of age, disability (whether physical or mental), chronic illness including (without limitation) learning difficulties or forming part of other vulnerable groups including offenders and not having suitable accommodation provided within their financial means primarily in the North West of England;
- Improving the health of aged, disabled (whether physically or mentally) or chronically sick people including (without limitation), individuals with learning difficulties and other vulnerable groups of persons including offenders by providing and managing social housing, providing and managing housing and other activities and services connected with or incidental to the provision of social housing primarily in the North West of England.
Public benefit
In planning our activities for the year, the trustees have considered the Charity Commission’s guidance on public benefit, including the guidance on public benefit and rental charging. The Association relies on its rental income to cover its operating costs. In setting the level of rental income, the directors give due consideration to the need to ensure the accommodation is accessible by it’s tenants through housing benefit or via their own personal funds.
Plan for future periods
Care Housing Association Limited plans to continue developing new properties to meet our objects over the coming 12 months. Although it is anticipated that most new business will be through leases with third party landlords, a significant amount of focus has been on ensuring risks associated with lease arrangements are reduced. This has been achieved through renegotiation of terms with landlords. However, access to capital is more limited than in previous years due to concerns form investors regarding the stability of the market, and rising finance costs which apply upwards pressures on rent levels.
Non-Financial KPI's
The Board considers non-financial KPI’s on a quarterly basis. This includes the following information:
Performance Indicator Actual Target
Emergency Repairs completed within timescales (4 hours) 95.60% 95%
Non-emergency repairs completed within timescales (4-21 days) 92.20% 95%
Average time taken to complete urgent repair 2.26 days 4 days
Average time taken to complete routine repair 9.4 days 21 days
Overall satisfaction with the repairs service (good or better) 90% 95%
Quarterly visits completed within timescales 100% 100%
Complaints 4 -
Any underperformance is reported to Board by the CEO.
Performance against repairs KPI’s dropped slightly below our targets this year for two main reasons:
This was largely due to difficulty in accessing properties. We are introducing better partnership working and communication with tenants and care providers to attempt to combat this issue.
We now capture data relating to tenant satisfaction in different ways, and in line with the requirements of the Tenants Satisfaction Measures (TSMs), as prescribed the the Regulator of Social Housing.
Financial KPI's
Value for money metrics
In addition to the ratios measured internally, the following ratios have been calculated for the value for money standard in accordance with the Regulator of Social Housing. Some of these ratios are included above and may be calculated differently as mentioned in the standard.
Reinvestment %
7.42%
Care Housing Association has reinvested in one freehold property in 2023-24 and is still growing through the leasehold market.
New supply delivered %
6.35%
Care Housing Association has delivered an additional fifty five units of Specialised Supported Housing with one being freehold purchases.
Gearing % (per VFM report)
9.75%
Care Housing have not taken on any additional debt, however, interest rate increases has resulted in capital not reducing to the same extent as in the comparative year.
Earnings before interest, tax, depreciation, amortisation, major repairs included (EBITDA MRI) interest cover %
522.47%
The increase in profit has resulted in more interest cover.
Headline social housing cost per unit £
£11,847
This is a measurement of key social housing costs against the number of units at the year end. The costs are identified by the Regulator of Social Housing.
Operating margin %
6.69%
Return on capital employed (ROCE) % (per VFM report)
5.55%
The directors present their annual report and financial statements for the year ended 31 March 2024.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Objectives and policies
The company holds or issues financial instruments in order to achieve three main objectives, being:
i) to finance its operations;
ii) to manage its exposure to interest, credit and liquidity risks arising from its operations and from its sources of finance; and
iii) for trading purposes.
In addition various financial instruments (e.g. accounts receivable, accounts payable, accruals and prepayments) arise directly from the company's operations.
Transactions in financial instruments result in the company assuming or transferring to another party one or
more of the financial risks described below.
Liquidity risk
Working capital and liquidity is managed as part of day to day business routines such as the company has no significant concentrations of liquidity risk.
Credit risk
The company has no significant concentrations of credit risk. Amounts shown in the balance sheet best represent the maximum credit risk exposure in the event other parties fail to perform their obligations under financial instruments.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
• the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
• we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the computer component manufacturing and supply sector;
• we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation;
• we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
• identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
• making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
• performed analytical procedures to identify any unusual or unexpected relationships;
• tested journal entries to identify unusual transactions;
• assessed whether judgements and assumptions made in determining the accounting
estimates were indicative of potential bias; and
• investigated the rationale behind significant or unusual transactions
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
• agreeing financial statement disclosures to underlying supporting documentation;
• reading the minutes of meetings of those charged with governance;
• enquiring of management as to actual and potential litigation and claims; and
• reviewing correspondence with HMRC, relevant regulators including the Health and Safety Executive, and the company’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance.
Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The company is a private company limited by share capital incorporated in United Kingdom.
The address of its registered office is:
Riverside House
Kings Reach Business Park
Yew Street
Stockport
Cheshire
SK4 2HD
The principal place of business is:
Suite 29
Hardmans Business Centre
New Hall Hey Road
Rawtenstall
Lancashire
BB4 6HH
Statement of compliance
These financial statements were prepared in accordance with Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and in accordance with the Housing SORP: 2018 (Statement of Recommended Practice for registered social housing providers)
Basis of preparation
These financial statements have been prepared using the historical cost convention except that as disclosed in the accounting policies certain items are shown at fair value.
Care Housing Association Limited is a public benefit entity in accordance with FRS 102 paragraph 3.3A
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Recognition and measurement
An equity instrument is any contact that evidences a residual interest in the assets of the company after deducting all of its liabilities. Where shares are issued, any component that creates a financial liability in the balance sheet. The corresponding dividends relating to the liability component are charged as interest expense in the profit and loss account.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Trade debtors
Trade debtors are amounts due from customers for merchandise sold or services performed in the ordinary course of business.
Trade debtors are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of trade debtors is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Trade creditors
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities.
Trade creditors are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Operating lease commitments
The company has entered into a number of operating leases which it obtains the use of. The classification of such leases as operating or finance lease requires the company to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains or acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position.
The average monthly number of persons employed by the company during the year was:
Their aggregate remuneration comprised:
The remuneration paid to key management in the year was £101,776 (2023: £100,313) including benefit in kind payments plus £3,141 (2023: £5,306) in employers pension contributions.
The bank loans are secured by a legal charge over 14 Daybrook,Skelmersdale, 34 Farringdon Road, Warrington, 519 Hempshaw Lane Stockport, 48 Ebdale Close, Stockport, 16 Corinthian Avenue, Liverpool, 148 Nangreave Road, Stockport, 6 Bangor Road, Cheadle, 18 Hertford Close, Warrington, 2 Savernake Road, Stockport, 31 Summerbridge Crescent, Bradford, 6 Lindbury Avenue, Stockport, Flats 1-9 Victoria Gardens, Clitheroe.
The cumulative capital repayments after 5 years are £1,559,034 and the interest rate on these repayments are 2.5% above the Bank of England base rate.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
Rental Income
Included in the rental income collected by the association is a percentage relating to future voids. This element is deferred in the financial statements and will be released to the profit and loss account as and when a void arises.
If, at the end of the agreement period, any of the deferred rental income for properties with Lancashire County Council is not released to the profit and loss account, one third of the balance is payable to Lancashire Social Services. This amount per the void provision at the 31st March 2024 is £168,998 (2023: £146,746). Due to the nature of the agreements there is a possible transfer of economic benefits, of which the amount remains uncertain.
The management agreements are in place for 10 or 15 years from when they commenced and are linked to the properties on an individual and property by property basis.
Grants
Within other creditors more than one year is a second grant that was issued to Care Housing which was in the year ended 31st March 2017. This was also used to purchase a property for individuals with learning disabilities (or such other needs as are agreed by NHS England). The terms of the grant stipulate that if the property is sold the grant is repayable, unless NHS England waiver its right to repayment. NHS England have 1st legal charge over the property. This is released using the accruals model in accordance with FRS102 due to the clause.
During 2020 a third grant was issued by NHS England with the same terms as the above NHS grant. The grant was issued for £419,000 in 2020 with a further £98,819 being issued in the 2021 year end.
During 2021 a fourth grant was issued by NHS England with the same terms as the above NHS grant. The grant was issued for £300,000 in 2021 with a further £125,616 issued in the 2022 year end.
During 2023 a fifth grant was issued by NHS England with the same terms as the above NHS grant. The grant was issued for £500,356 in 2023 with a further £90,003 issued in the 2024 year end.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: