Registration number:
(A company limited by guarantee)
for the Year Ended 31 March 2024
Shire Homes Lettings Limited
Contents
Company Information |
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Strategic Report |
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Directors' Report |
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Statement of Directors' Responsibilities |
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Independent Auditor's Report |
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Profit and Loss Account |
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Statement of Comprehensive Income |
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Balance Sheet |
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Statement of Changes in Equity |
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Notes to the Financial Statements |
Shire Homes Lettings Limited
Company Information
Directors |
P R Fane H Wood |
Registered office |
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Auditors |
|
Shire Homes Lettings Limited
Strategic Report for the Year Ended 31 March 2024
The directors present their report for the year ended 31 March 2024.
Fair review of the business
The Company was incorporated on 10 April 2017 and began trading during 2017/18, and therefore has now been trading for over six full financial years.
Shire Homes Lettings Limited was incorporated to assist South Cambridgeshire District Council in meeting its statutory responsibility to house homeless households. The principal activity of the company is to lease residential accommodation in the district from private landlords on leases of up to three years in term. These properties are then subsequently let to homeless houses on assured short-hold tenancies with minimum period of six months.
The company is responsible for sourcing, leasing, sub-letting, collecting rents and repairing the properties, with the Council making payment to the Company in the form of a service fee for the net cost of the provision of the services. The operation of a private sector leasing scheme assists the Council in meeting its statutory responsibilities but minimises the use of alternative forms of short-term accommodation such as bed and breakfast, which can be cost prohibitive.
The net costs of administering the private sector leasing scheme, after allowing for payment of lease premiums and responsive repairs and recovering rents due under assured short hold tenancies is met in full through the Service Level Agreement mechanism in place with the parent undertaking, South Cambridgeshire District Council.
The Company is wholly owned by South Cambridgeshire District Council. The company is a private company limited by guarantee and has no share capital. The liability of each member in the event of winding up is limited to £1. The number of members at the period end was 1. The company is incorporated in England and Wales and the registered office is South Cambridgeshire Hall, Cambourne Business Park, Cambourne, Cambridge, CB23 6EA.
The Company has adopted FRS 101 and has taken advantage of the disclosure exemptions allowed under this standard. The Company's parent undertaking, South Cambridgeshire District Council ("South Cambs"), was notified of and did not object to the use of disclosure exemptions under FRS 101.
The company's key financial and other performance indicators during the year were as follows:
Financial KPIs |
Unit |
2024 |
2023 |
Turnover |
£ |
1,309,041 |
1,031,892 |
(Loss) / Profit for the year after taxation |
£ |
- |
|
Key achievements in the twelve-month period to 31 March 2024 include entering into additional leases for self-contained properties as well as increasing the number of rooms available in shared Housing in Multiple Occupation (HMOs). As of 31 March 2024 the Company held 77 leases for self-contained units with an additional 6 properties used as HMOs and amounting to 24 rooms. This means the original Business Plan target to acquire 10 self-contained properties per year (after the initial target of 40 properties) has been met.
Shire Homes Lettings Limited
Strategic Report for the Year Ended 31 March 2024
Principal risks and uncertainties
Contract Risk:
Contract risk is the risk that the lack of understanding or effective management may lead to the erosion in value of a contract. The Company manages this risk by competitively tendering contracts and periodically reviewing contracts to ensure effective monitoring and adjustment of pricing, terms and conditions relevant to market conditions and contract and performance expectations. The company has previously purchased advice on the quality and suitability of the contract set up to provide a day to day maintenance service. As a result of the advice received, some changes have been made to operating procedures in order maximise contract effectiveness, manage costs and also ensure compliance.
Interest Rate Risk:
The Company does not currently have any borrowing, the finance costs included within the financial statements have arisen as a consequence of IFRS16. These finance costs relate to the difference between the actual cash flows and the discounted cash flows over the remaining term of each lease held by the company. Net operational costs are borne in year by the parent undertaking, South Cambridgeshire District Council.
Price, Credit, Liquidity and Cash Flow Risk:
Price risk is the risk of fluctuation in the market price for property leases yet to be entered into by the Company. The business model assumes 40 property leases will be entered into and thereafter increased by 10 a year. Those not yet in place are subject to price risk. The business model of the Company is linked closely to the level of Local Housing Allowance (LHA). Although LHA rates have been relatively consistent over recent years, any unexpected fluctuation in these will impact on the potential price of property leases. For future years, the wording of the Company's approach in all published literature will be amended to ensure that, in the event of a significant fluctuation in LHA levels, new property leases can be negotiated on comparable rates to existing leases.
Credit risk is the risk that one party to a transaction will cause financial loss for the other party by failing to discharge an obligation. The main exposure to credit risk relates to housing rental income and the Company reduces the risk of losses in this area of the business by supporting tenants to ensure that they are claiming all of the financial assistance to which they are entitled. Credit checks on prospective tenants are not undertaken and rental deposits are not collected, as the nature of the private sector leasing scheme is such that those in need of the accommodation are unlikely to pass credit checks or have funds available to meet a deposit. The net operational costs of the schemes are however underwritten by the Council in the form of the Service Fee in the Service Level Agreement. This arrangement ensures that the risk associated with non-collection of rental income is mitigated.
Liquidity risk is the risk that the entity will encounter difficulty in meeting obligations associated with financial liabilities. All trade and other payables are due to be paid in less than one year. Contractual commitments under the residential property leases can span up to three years, although there are provisions in place for earlier termination by either party of required.
Cash flow risk is the risk of exposure to variability in cash flows. The Company receives funding from the Council on a quarterly basis, with the actual costs incurred in the previous quarter adjusted for as part of the following quarter's payment, thus mitigating cashflow risks.
Shire Homes Lettings Limited
Strategic Report for the Year Ended 31 March 2024
Additional Risks
Current pressures in the Housing sector pose an increased level of risk to the sustainability of the scheme. It is an ongoing challenge to attract new landlords to the scheme alongside the risk that existing landlords may choose not to renew their involvement in the scheme once the initial Head Lease ends. Proposals in the Renters Reform Bill (now superseded by the Renters Rights Bill) relating to the removal of S21 notices have increased landlord concerns.
To help mitigate against this pressure, extra capacity was brought into the team in the form of a Marketing Officer who has been tasked with promoting the scheme and attracting new business. In addition, their role contains the flexibility to provide general cover to other team members during busy periods. During their first year in post, the Marketing Officer has received enquiries from investors and initiated discussions with a local building society to explore mortgage options for Private Sector landlords. The expansion of the HMO element of the scheme is included on the scheme Risk Register in relation to the health and safety requirements, including fire safety. This has led to all staff receiving bespoke training in HMO legislation, including repair obligations, to ensure that the correct safety standards are understood and maintained.
Future developments
Shire Homes continues to explore all opportunities to acquire more landlords for self-contained and shared properties. One area of work that has an increasing focus relates to the energy efficiency of properties and the extent to which landlords can be encouraged to maximise the energy rating of each premise. Work has taken place with Aran Insulation to increase the energy efficiency of properties in the district. Work will also continue to ensure the company receives a good standard of service in terms of any day-to-day repairs and any required compliance work.
Approved by the
......................................... |
Shire Homes Lettings Limited
Directors' Report for the Year Ended 31 March 2024
The directors present their report and the financial statements for the year ended 31 March 2024.
Directors' of the company
The directors, who held office during the year, were as follows:
Principal activity
The principal activity of the company is the lease of residential accommodation in the district from private landlords on leases of up to three years in term. These properties are then subsequently let to homeless houses on assured short-hold tenancies with minimum period of six months.
Information included in the Strategic Report
The Company has chosen, in accordance with Companies Act 2006, s.141C (11), to set out in the Company's Strategic Report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch.7 to be contained in the Directors' Report.
Disclosure of information to the auditors
Each director has taken steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditor is unaware.
Reappointment of auditors
In accordance with section 485 of the Companies Act 2006, a resolution for the re-appointment of Williamson & Croft Audit Ltd as auditors of the company is to be proposed at the forthcoming Annual General Meeting.
Approved by the
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Shire Homes Lettings Limited
Statement of Directors' Responsibilities
The directors acknowledge their responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 'Reduced Disclosure Framework' ('FRS 101'). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
• | select suitable accounting policies and apply them consistently; |
• | make judgements and accounting estimates that are reasonable and prudent; |
• | state whether FRS 101 has been followed, subject to any material departures disclosed and explained in the financial statements; and |
• | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. |
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Shire Homes Lettings Limited
Independent Auditor's Report to the Members of Shire Homes Lettings Limited
Opinion
We have audited the financial statements of Shire Homes Lettings Limited (the 'company') for the year ended 31 March 2024, which comprise the Profit and Loss Account, Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 'Reduced Disclosure Framework'.
In our opinion the financial statements:
• | give a true and fair view of the state of the company's affairs as at 31 March 2024 and of its results for the year then ended; |
• | have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and |
• | have been prepared in accordance with the requirements of the Companies Act 2006. |
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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 original financial statements were 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
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Shire Homes Lettings Limited
Independent Auditor's Report to the Members of Shire Homes Lettings Limited
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• |
the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and |
• |
the Strategic Report and Directors' Report have been prepared in accordance with applicable legal requirements. |
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• | adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or |
• | the financial statements are not in agreement with the accounting records and returns; or |
• | certain disclosures of directors’ remuneration specified by law are not made; or |
• | we have not received all the information and explanations we require for our audit. |
Responsibilities of directors
As explained more fully in the [set out on page 6], 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.
Auditor Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Shire Homes Lettings Limited
Independent Auditor's Report to the Members of Shire Homes Lettings Limited
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we have given consideration to the control environment (including management's own process for identifying and assessing risks) as well as the nature of the entity, the industry in which it operates and the underlying performance. Consideration was also given to the attitudes and incentives of management to commit fraud. We determined that the greatest potential for fraud existed in the following areas: timing of recognition of income; value of investment properties; and posting of unusual journals and complex transactions. In line with all audits performed under International Standards on Auditing (UK), we planned and performed specific procedures to respond to the risk of management override of controls.
We also obtained an understanding of the applicable laws and regulations that the company has to abide by, through discussions with management and those charged with governance, as well as commercial knowledge of the sector and statutory legislation. We paid particular focus to those laws and regulations that had the potential to materially impact the amounts and disclosures within the financial statements. The key laws and regulations we identified were the UK Companies Act, health and safety, tax legislation and landlord regulations.
After our initial risk assessment, we performed the following procedures to detect material misstatements in respect of irregularities arising due to fraud or error:
• Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business;
• Reviewing financial statement disclosures and testing these against supporting documentation to assess compliance with applicable laws and regulations;
• Assessing key accounting estimates within the financial statements in order to assess their reasonableness and determine whether there were any indications of management bias in the estimates;
• Reviewing minutes of meetings of those charged with governance;
• Making enquiries of management as to whether they are aware of any alleged, suspected or actual fraud during the year; and
• Reviewing information provided by managements' experts against available market data.
We also performed procedures to satisfy ourselves regarding compliance with applicable laws and regulations, including:
• Making enquiries of management and those charged with governance if there were any actual and potential litigation and claims;
• Reviewing legal and professional fees incurred in the year for indicators of any litigation or claims against the company;
• Reviewing minutes of meetings of those charged with governance; and
• Reviewing correspondence with relevant legal authorities.
All audit team members were made aware of the applicable laws and regulations, as well as potential fraud risks during the planning stage of the audit and this was discussed at the audit team planning meeting. It was therefore determined that team members all had the relevant awareness and competence to identify any instances of non-compliance with relevant laws and regulations or fraud.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Shire Homes Lettings Limited
Independent Auditor's Report to the Members of Shire Homes Lettings Limited
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.
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For and on behalf of
York House
20 York Street
M2 3BB
Shire Homes Lettings Limited
Profit and Loss Account for the Year Ended 31 March 2024
Note |
2024 |
2023 |
|
Turnover |
|
|
|
Cost of sales |
( |
( |
|
Gross profit |
|
|
|
Administrative expenses |
( |
( |
|
Operating profit |
|
|
|
Interest payable and similar expenses |
( |
( |
|
(50,987) |
(35,970) |
||
Profit/(loss) before tax |
- |
- |
|
Profit/(loss) for the year |
- |
- |
The above results were derived from continuing operations.
Shire Homes Lettings Limited
Statement of Comprehensive Income for the Year Ended 31 March 2024
2024 |
2023 |
|
Profit/(loss) for the year |
- |
- |
Total comprehensive income for the year |
- |
- |
Shire Homes Lettings Limited
(Registration number: 10718044)
Balance Sheet as at 31 March 2024
Note |
31 March |
31 March |
|
Fixed assets |
|||
Right of use assets |
|
|
|
Current assets |
|||
Trade and other debtors |
|
|
|
Cash at bank and in hand |
|
|
|
|
|
||
Creditors: Amounts falling due within one year |
( |
( |
|
Net current liabilities |
( |
( |
|
Total assets less current liabilities |
|
|
|
Creditors: Amounts falling due after more than one year |
( |
( |
|
Net assets/(liabilities) |
- |
- |
|
Capital and reserves |
|||
Shareholders' funds/(deficit) |
- |
- |
Approved by the
......................................... |
Shire Homes Lettings Limited
Statement of Changes in Equity for the Year Ended 31 March 2024
Retained earnings |
Total |
|
At 1 April 2023 |
- |
- |
Profit/(loss) for the year |
- |
- |
At 31 March 2024 |
- |
- |
Retained earnings |
Total |
|
At 1 April 2022 |
- |
- |
Profit/(loss) for the year |
- |
- |
At 31 March 2023 |
- |
- |
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
General information |
The company is a private company limited by guarantee, incorporated and domiciled in England and Wales, and consequently does not have share capital. Each of the members is liable to contribute an amount not exceeding £Nil towards the assets of the company in the event of liquidation.
The address of its registered office is:
These financial statements were authorised for issue by the
Accounting policies |
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS101) and in accordance with applicable accounting standards.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.
The financial statements are presented in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
Summary of disclosure exemptions
In these financial statements, the company has taken advantage of the exemptions available under FRS 101 in respect of the following disclosures:
• |
Paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j)-(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66, B67 of IFRS 3 - ‘Business combinations’. |
• |
Paragraphs 91 to 99 of IFRS 13 - ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of assets and liabilities). |
• |
The following paragraphs of IAS 1 - ‘Presentation of financial statements’ (removing the requirement to present): |
• |
IAS 7 - ‘Statement of cash flows’. |
• |
Paragraphs 30 and 31 of IAS 8 - ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective). |
• |
The requirements of paragraphs 134(d) to 134(f) and 135(c) to 135(e) of IAS 36, 'Impairment of Assets' |
• |
the company shall not present a statement of compliance with IFRS. |
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Where required, equivalent disclosures are given in the group accounts of South Cambridgeshire District Council. The group accounts of South Cambridgeshire District Council are available to the public and can be obtained as set out in note 18.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future.
The Directors of the Company and the parent undertaking, South Cambridgeshire District Council, believe that the Company is well placed to manage its business risks successfully. On-going operational funding arrangements have been agreed with South Cambridgeshire District Council in the form of a Service Level Agreement.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. As a result, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Changes in accounting policy
None of the standards, interpretations and amendments effective for the first time from 1 April 2023 have had a material effect on the financial statements.
Revenue recognition
Recognition
Turnover represents amounts received and receivable, excluding any value added tax, in respect of goods and services provided during the period. Turnover, all of which arises in the United Kingdom, is currently attributable to two activities, the sub-letting of leased residential properties and the provision of private sector leasing services to South Cambridgeshire District Council to assist in meeting their statutory responsibilities to house homeless households, and those at risk of becoming homeless.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, value added tax and other sales taxes.
The principles in IFRS are applied to revenue recognition criteria using the following 5 step model:
1. Identify the contracts with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognise revenue when or as the entity satisfies its performance obligations
Rental income
Rental income arising through tenancy agreements for properties which are leased by the Company is accounted for on a weekly basis in line with that charged via the tenancy agreement.
Tangible assets
Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation
Depreciation is recognised so as to write off the cost or valuation of assets less their residual.values over their useful lives on the following bases:
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Asset class |
Depreciation method and rate |
Leasehold land and buildings |
over the period of the lease |
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Trade debtors
Trade debtors are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as fixed assets.
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 debtors.
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 payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, 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.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Leases
Definition
A lease is a contract, or a part of a contract, that conveys the right to use an asset or a physically distinct part of an asset (“the underlying asset”) for a period of time in exchange for consideration. Further, the contract must convey the right to the company to control the asset or a physically distinct portion thereof. A contract is deemed to convey the right to control the underlying asset if, throughout the period of use, the company has the right to:
· Obtain substantially all the economic benefits from the use of the underlying asset, and;
· Direct the use of the underlying asset (e.g. direct how and for what purpose the asset is used)
Where contracts contain a lease coupled with an agreement to purchase or sell other goods or services (i.e., non-lease components), the non-lease components are identified and accounted for separately from the lease component. The consideration in the contract is allocated to the lease and non-lease components on a relative standalone price basis using the principles in IFRS15.
Initial recognition and measurement
The company initially recognises a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term.
The lease liability is measured at the present value of the lease payments to be made over the lease term. The lease payments include fixed payments, purchase options at exercise price (where payment is reasonably certain), expected amount of residual value guarantees, termination option penalties (where payment is considered reasonably certain) and variable lease payments that depend on an index or rate.
The right-of-use asset is initially measured at the amount of the lease liability, adjusted for lease prepayments, lease incentives received, the company’s initial direct costs (e.g., commissions) and an estimate of restoration, removal and dismantling costs.
Subsequent measurement
After the commencement date, the company measures the lease liability by:
(a) Increasing the carrying amount to reflect interest on the lease liability;
(b) Reducing the carrying amount to reflect the lease payments made; and
(c) Re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in substance fixed lease payments or on the occurrence of other specific events.
Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. Interest charges are included in finance cost in the profit and loss account, unless the costs are included in the carrying amount of another asset applying other applicable standards. Variable lease payments not included in the measurement of the lease liability, are included in operating expenses in the period in which the event or condition that triggers them arises.
The related right-of-use asset is accounted for using the Cost model in IAS 16 and depreciated and charged in accordance with the depreciation requirements of IAS 16 Property, Plant and Equipment as disclosed in the accounting policy for tangible assets. Adjustments are made to the carrying value of the right of use asset where the lease liability is re-measured in accordance with the above. Right of use assets are tested for impairment in accordance with IAS 36 Impairment of assets as disclosed in the accounting policy in impairment.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Lease modifications
If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease. If a lease continues to exist, the lease modification will result in either a separate lease or a change in the accounting for the existing lease.
The modification is accounted for as a separate lease if both:
(a) The modification increases the scope of the lease by adding the right to use one or more underlying assets; and
(b) The consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.
If both of these conditions are met, the lease modification results in two separate leases, the unmodified original lease and a separate lease. The company then accounts for these in line with the accounting policy for new leases.
If either of the conditions are not met, the modified lease is not accounted for as a separate lease and the consideration is allocated to the contract and the lease liability is re-measured using the lease term of the modified lease and the discount rate as determined at the effective date of the modification.
For a modification that fully or partially decreases the scope of the lease (e.g., reduces the square footage of leased space), IFRS 16 requires a lessee to decrease the carrying amount of the right-of-use asset to reflect partial or full termination of the lease. Any difference between those adjustments is recognised in profit or loss at the effective date of the modification.
For all other lease modifications which are not accounted for as a separate lease, IFRS 16 requires the lessee to recognise the amount of the re-measurement of the lease liability as an adjustment to the corresponding right-of-use asset without affecting profit or loss.
Short term and low value leases
The company has made an accounting policy election, by class of underlying asset, not to recognise lease assets and lease liabilities for leases with a lease term of 12 months or less (i.e., short-term leases).
The company has made an accounting policy election on a lease-by-lease basis, not to recognise lease assets on leases for which the underlying asset is of low value.
Lease payments on short term and low value leases are accounted for on a straight line bases over the term of the lease or other systematic basis if considered more appropriate. Short term and low value lease payments are included in operating expenses in the profit and loss account.
Sub leases
If an underlying asset is re-leased by the company to a third party and the company retains the primary obligation under the original lease, the transaction is deemed to be a sublease. The company continues to account for the original lease (the head lease) as a lessee and accounts for the sublease as a lessor (intermediate lessor). When the head lease is a short term lease, the sublease is classified as an operating lease. Otherwise, the sublease is classified using the classification criteria applicable to Lessor Accounting in IFRS 16 by reference to the right-of-use asset in the head lease (and not the underlying asset of the head lease).
After classification lessor accounting is applied to the sublease.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Financial instruments
Initial recognition
Financial assets and financial liabilities comprise all assets and liabilities reflected in the balance sheet, although excluding tangible assets, investment properties, intangible assets, deferred tax assets, prepayments, deferred tax liabilities and employee benefits plan.
The company recognises financial assets and financial liabilities in the balance sheet when, and only when, the company becomes party to the contractual provisions of the financial instrument.
Financial assets are initially recognised at fair value. Financial liabilities are initially recognised at fair value, representing the proceeds received net of premiums, discounts and transaction costs that are directly attributable to the financial liability.
All regular way purchases and sales of financial assets and financial liabilities classified as fair value through profit or loss (“FVTPL”) are recognised on the trade date, i.e. the date on which the company commits to purchase or sell the financial assets or financial liabilities. All regular way purchases and sales of other financial assets and financial liabilities are recognised on the settlement date, i.e. the date on which the asset or liability is received from or delivered to the counterparty. Regular way purchases or sales are purchases or sales of financial assets that require delivery within the time frame generally established by regulation or convention in the market place.
Subsequent to initial measurement, financial assets and financial liabilities are measured at either amortised cost or fair value.
Classification and measurement
Financial instruments are classified at inception into one of the following categories, which then determine the subsequent measurement methodology:-
Financial assets are classified into one of the following three categories:-
· financial assets at amortised cost;
· financial assets at fair value through other comprehensive income (FVTOCI); or
· financial assets at fair value through the profit or loss (FVTPL).
Financial liabilities are classified into one of the following two categories:-
· financial liabilities at amortised cost; or
· financial liabilities at fair value through the profit or loss (FVTPL).
The classification and the basis for measurement are subject to the company’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets, as detailed below:-
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:-
· the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
· the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
If either of the above two criteria is not met, the financial assets are classified and measured at fair value through the profit or loss (FVTPL).
If a financial asset meets the amortised cost criteria, the company may choose to designate the financial asset at FVTPL. Such an election is irrevocable and applicable only if the FVTPL classification significantly reduces a measurement or recognition inconsistency.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI only if it meets both of the following conditions and is not designated as at FVTPL:-
· the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
· the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investments that is not held for trading, the company may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.
If an equity investment is designated as FVTOCI, all gains and losses, except for dividend income, are recognised in other comprehensive income and are not subsequently included in the statement of income.
Financial assets at fair value through the profit or loss (FVTPL)
Financial assets not otherwise classified above are classified and measured as FVTPL.
Financial liabilities at amortised cost
All financial liabilities, other than those classified as financial liabilities at FVTPL, are measured at amortised cost using the effective interest rate method.
Financial liabilities at fair value through the profit or loss
Financial liabilities not measured at amortised cost are classified and measured at FVTPL. This classification includes derivative liabilities.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Derecognition
Financial assets
The company derecognises a financial asset when;
- the contractual rights to the cash flows from the financial asset expire,
- it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred; or
- the company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of the consideration received is recognised as a gain or loss in the profit or loss.
Any cumulative gain or loss recognised in OCI in respect of equity investment securities designated as FVTOCI is not recognised in profit or loss on derecognition of such securities. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the company is recognised as a separate asset or liability.
The company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised.
When the company derecognises transferred financial assets in their entirety, but has continuing involvement in them then the entity should disclose for each type of continuing involvement at the reporting date:
(a) The carrying amount of the assets and liabilities that are recognised in the entity’s balance sheet and represent the entity’s continuing involvement in the derecognised financial assets, and the line items in which those assets and liabilities are recognised.
(b) The fair value of the assets and liabilities that represent the entity’s continuing involvement in the derecognised financial assets;
(c) The amount that best represents the entity’s maximum exposure to loss from its continuing involvement in the derecognised financial assets, and how the maximum exposure to loss is determined
(d) The undiscounted cash outflows that would or may be required to repurchase the derecognised financial assets or other amounts payable to the transferee for the transferred assets
Financial liabilities
The company derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Modification of financial assets and financial liabilities
Financial assets
If the terms of a financial asset are modified, the company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to the cash flows from the original financial asset are deemed to expire. In this case the original financial asset is derecognised and a new financial asset is recognised at either amortised cost or fair value.
If the cash flows are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in the statement of income.
Financial liabilities
If the terms of a financial liabilities are modified, the company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual obligations from the cash flows from the original financial liabilities are deemed to expire. In this case the original financial liabilities are derecognised and new financial liabilities are recognised at either amortised cost or fair value.
If the cash flows are not substantially different, then the modification does not result in derecognition of the financial liabilities. In this case, the company recalculates the gross carrying amount of the financial liabilities and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in the statement of income.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Impairment of financial assets
Measurement of Expected Credit Losses
The company recognises loss allowances for expected credit losses (ECL) on financial instruments that are not measured at FVTPL, namely:
- Financial assets that are debt instruments
- Accounts and other receivables
- Financial guarantee contracts issued; and
- Loan commitments issued.
The company classifies its financial instruments into stage 1, stage 2 and stage 3, based on the applied impairment methodology, as described below:
Stage 1: for financial instruments where there has not been a significant increase in credit risk since initial recognition and that are not credit-impaired on origination, the company recognises an allowance based on the 12-month ECL.
Stage 2: for financial instruments where there has been a significant increase in credit risk since initial recognition but they are not credit-impaired, the company recognises an allowance for the lifetime ECL.
Stage 3: for credit-impaired financial instruments, the company recognises the lifetime ECL.
The company measures loss allowances at an amount equal to the lifetime ECL, except for the following, for which they are measured as a 12-month ECL:
- debt securities that are determined to have a low credit risk (equivalent to investment grade rating) at the reporting date; and
- other financial instruments on which the credit risk has not increased significantly since their initial recognition.
The company considers a debt security to have low credit risk when their credit risk rating is equivalent to the globally understood definition of ‘investment grade’.
A 12-month ECL is the portion of the ECL that results from default events on a financial instrument that are probable within 12 months from the reporting date.
Provisions for credit-impairment are recognised in the statement of income and are reflected in accumulated provision balances against each relevant financial instruments balance.
Evidence that the financial asset is credit-impaired include the following;
- Significant financial difficulties of the borrower or issuer;
- A breach of contract such as default or past due event;
- The restructuring of the loan or advance by the company on terms that the company would not consider otherwise;
- It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
- The disappearance of an active market for the security because of financial difficulties; or
- There is other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the company, or economic conditions that correlate with defaults in the company.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
For trade debtors, the company applies the simplified approach, which requires expected lifetime losses to be recognised from initial recognition of the debtors.
To measure the expected credit losses, trade debtors and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade debtors for the same types of contracts. The company has therefore concluded that the expected loss rates for trade debtors are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 March 2024 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the debtors. The company has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
Critical accounting judgements and key sources of estimation uncertainty |
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of certain financial assets, liabilities, income and expenses.
The use of estimates and assumptions is principally limited to the determination of provisions for impairment as explained in more detail below:-
Provision for bad and doubtful debts
In determining impairment of financial assets, judgement is required in the estimation of the amount and timing of future cash flows as well as an assessment of whether the credit risk on the financial asset has increased significantly since initial recognition and incorporation of forward-looking information in the measurement of ECL.
Specifically, the Company holds a provision for bad debts at the end of the accounting period, these relate to specific debts reviewed for their recoverability at the year end date.
Turnover |
The analysis of the company's turnover for the year by class of business is as follows:
2024 |
2023 |
|
Rental income |
|
|
Other income |
|
|
|
|
The analysis of the company's turnover for the year by market is as follows:
2024 |
2023 |
|
UK |
|
|
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Cost of sales |
Rent |
3,226 |
- |
Rates |
5,678 |
12,439 |
Water rates |
793 |
2,219 |
Light, heat and power |
30,683 |
23,554 |
Insurance |
2,072 |
2,072 |
Repairs and maintenance |
107,925 |
55,262 |
Cleaning |
3,510 |
35 |
Legal and professional fees |
2,063 |
53 |
Depreciation of short leasehold |
760,866 |
586,250 |
(Profit)/loss on disposal of tangible fixed assets |
(819) |
(305) |
915,997 |
681,579 |
Operating profit |
Arrived at after charging/(crediting)
2024 |
2023 |
|
Depreciation on right of use assets - property |
760,866 |
586,250 |
Profit on disposal of tangible assets |
( |
( |
Auditors' remuneration |
2024 |
2023 |
|
Audit of the financial statements |
|
|
Other fees to auditors |
||
Taxation compliance services |
|
|
All other non-audit services |
|
|
|
|
Staff costs |
The aggregate payroll costs (including directors' remuneration) were as follows:
2024 |
2023 |
|
Other employee expense |
|
|
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
During the period the Company had no employees, all staff costs have been incurred by South Cambridgeshire District Council aand recharge to the Company. The total recharge for employee related contracted services is as detailed above.
Number of employees:
Interest payable and similar expenses |
2024 |
2023 |
|
Interest on bank overdrafts and borrowings |
- |
|
Interest expenses on right-of-use assets |
50,987 |
35,941 |
|
|
Income tax |
Tax charged/(credited) in the profit and loss account
2024 |
2023 |
|
Current taxation |
||
UK corporation tax |
- |
- |
- |
- |
The tax on profit before tax for the year is the same as the standard rate of corporation tax in the UK (2023 - the same as the standard rate of corporation tax in the UK) of 25% (2023 - 19%).
The differences are reconciled below:
2024 |
2023 |
|
Profit/(loss) before tax |
- |
- |
Corporation tax at standard rate |
- |
- |
Decrease (increase) from effect of revenues exempt from taxation |
(252,249) |
(10,182) |
Decrease (increase) from tax losses for which no deferred tax asset was recognised |
25,249 |
10,182 |
Total tax credit |
( |
- |
The Company has estimated corporation tax losses of £295,988 (2023: £194,992), carried forward for utilisation against future profits. The tax losses have resulted in a potential deferred tax asset of approximately £73,997 (2023: £48,748) which has not been recognised on the basis that the timing and availability of future trading profits against which to utilise these losses remains uncertain.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Right of use assets |
Property |
Total |
|
Cost or valuation |
||
At 1 April 2023 |
|
|
Additions |
|
|
Disposals |
( |
( |
At 31 March 2024 |
|
|
Depreciation |
||
At 1 April 2023 |
|
|
Charge for the year |
|
|
Eliminated on disposal |
( |
( |
At 31 March 2024 |
|
|
Carrying amount |
||
At 31 March 2024 |
|
|
At 31 March 2023 |
|
|
Trade and other debtors |
31 March |
31 March |
|
Trade debtors |
|
|
Provision for impairment of trade debtors |
( |
( |
Net trade debtors |
|
|
Prepayments and accrued income |
|
|
Other debtors |
|
|
|
|
Trade and other debtors disclosed above are measured at amortised cost.
The company's exposure to credit and market risks, including maturity analysis, relating to trade and other debtors is disclosed in note 17 "Financial risk review".
Cash at bank and in hand |
31 March |
31 March |
|
Cash at bank |
|
|
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Creditors: amounts falling due within one year |
31 March |
31 March |
|
Trade creditors |
|
|
Accruals and deferred income |
|
|
Amounts owed to group undertakings |
|
|
Social security and other taxes |
|
|
Current portion of long term lease liabilities |
|
|
Payments received on account |
|
|
|
|
The company's exposure to market and liquidity risks, including maturity analysis, relating to trade and other creditors is disclosed in note 17 "Financial risk review".
Loans and borrowings |
31 March |
31 March |
|
Current loans and borrowings |
||
Amounts owed to group undertakings |
124,374 |
116,257 |
Amounts owed to group undertakings of £124,374 (2023: £116,257) relate to recharges for contracted services, owed by the Company to South Cambridgeshire District Council and in the current year is net of amounts due from the Council in respect of unpaid service fees owed to the Company.
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows: payable later than one year and no later than five years.
The company's exposure to market and liquidity risks, including maturity analysis, relating to loans and borrowings is disclosed in note 17 "Financial risk review".
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Leases |
Leases included in creditors
31 March |
31 March |
|
Current portion of long term lease liabilities |
|
|
Long term lease liabilities |
|
|
Lease liabilities maturity analysis
A maturity analysis of lease liabilities based on undiscounted gross cash flow is reported in the table below:
31 March |
31 March |
|
Less than one year |
|
|
In two to five years |
|
|
Total lease liabilities (undiscounted) |
|
|
At 31 March 2024, the Company holds 83 (2023: 73) seperate operating leases for residential dwellings utilised for sub-letting purposes across the district. Each lease has a term of three years, unless a break clause is invoked at the end of 12 months by either party. The company is responsible for all day to days repairs whilst the head landlord (property owner) remains responsible for any major repairs and improvements required to the properties during the period of each lease.
The total cash outflow for the year in relation to leases in which the company is the lessee were £825,981 (2023: £623,554).
The fair value of the company's lease obligations is approximately equal to their carrying amount.
The company then sublease these properties to individual tenants for residential purposes. The leases are negotiated over terms of 6 to 12 months and rentals are fixed for that period. The leases may continue on a monthky rolling basis if agreed by all parties.
The total of future minimum sublease payment expected to be received under non-cancellable subleases at te reporting end date is £96,802 (2023: £99,995).
Financial risk review |
This note presents information about the company’s exposure to financial risks and the company’s management of capital.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Credit risk
There are no significant concentrations of credit risk within the Company unless otherwise disclosed. The maximum credit risk exposure relating to financial assets is represented by carrying value as at the balance sheet date.
The Company has established procedures to minimise the risk of default by trade debtors including detailed credit checks undertaken before a customer is accepted. Historically, these procedures have proved effective in minimising the level of impaired and past due debtors.. The risk is mitigated by the company by The credit risk on liquid funds is limited as the funds are held at banks with high credit ratings. The Company has procedures to minimise the risk of default by trade debtors, including the provision of support to ensure that all financial assistance to which the debtors are entitled, is pursued.
No significant receivable balances are impaired at the reporting date and the company does not old any collateral or other credit enhancements to cover the credit risk..
Liquidity risk
Liquidity risk is the risk that the company fails to have sufficient funds to meet its debts as they become due. The liquidity risk of the company is managed centrally by the Board and the company holds funds in short-term bank deposits so that they are available when required.
The Board believes the current level of financial liabilities to be in line with expectations. The level of cash balances and trade and other receivables is deemed to be sufficient to discharge the company’s financial liabilities as they fall due.
Maturity analysis for financial liabilities and financial assets
All of the company’s financial assets and financial liabilities are all wholly receivable and payable within one year, except in so far as lease liabilities are payable in more than one year as outlined in Note 15 "Leases".
Market risk
Market risk is the risk that the fair value or future cash flows from a financial instrument will fluctuate because of changes in market prices. The principle ways in which the company is exposed to such fluctuations is through interest rate risk.
Interest rate risk |
The company has minimal exposure to interest rate risk being only on bank overdrafts with total interest payable on bank overdrafts in the period of £NIL (2023: £29).
To manage this risk, management regularly review the cashflow projections for the business and discuss whether the Company will require its overdraft and whether alternative forms of borrowings (for example bank loans or loans from other group undertakings) may be more appropriate dependent upon the cashflow requirements of the business.
Sensitivity analysis
A sensitivity analysis has not been performed on the basis that the interest expense is not material in the current period and is not anticipated to be material in future periods.
Shire Homes Lettings Limited
Notes to the Financial Statements for the Year Ended 31 March 2024
Capital risk management |
Capital management
The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order to provide returns for members, benefits for other stakeholders and to maintain an optimal capital structure to reduce the costs of capital.
The capital employed by the company is composed of the total equity disclosed in the statement of financial position.
Parent and ultimate parent undertaking |
The company's immediate parent is
The most senior parent entity producing publicly available financial statements is