These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

Derive (Salford) Group Limited is a private company limited by shares incorporated in England and Wales. The registered office is Salford Civic Centre Chorley Road, Swinton, Manchester, United Kingdom, M27 5DA.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of tangible fixed assets (land and buildings) at fair value. The principal accounting policies adopted are set out below.

Turnover is recognised at the fair value of the consideration receivable for rental income derived from the company's properties.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

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:

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.

Properties whose fair value can be measured reliably are held under the revaluation model and are carried at a revalued amount, being their fair value at the date of valuation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value of the land and buildings is usually considered to be their market value.

Revaluation gains and losses are recognised in other comprehensive income and accumulated in equity, except to the extent that a revaluation gain reverses a revaluation loss previously recognised in profit or loss or a revaluation loss exceeds the accumulated revaluation gains recognised in equity; such gains and losses are recognised in profit or loss.

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

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.

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.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Recognition and Measurement

Deferred income comprises grants received from Salford City Council to fund property acquisitions for social and affordable housing purposes. The grants are recognised in the profit and loss account over the expected useful economic life of the funded properties, which is estimated at 30 years, in accordance with FRS 102, Section 24.5(a).

Recognition Method

The grants are initially recorded as deferred income on the balance sheet. A proportion is systematically released to the profit and loss account each year in line with the useful economic life of the properties.

Basis for Recognition Period

The 30-year recognition period reflects:

- Industry standards for affordable housing properties

- Independent valuation assessments and condition reports

- The organisation's asset management strategy

- Long-term maintenance projections

Accounting Treatment

The annual release to income is calculated using the straight-line method, whereby the total grant amount is divided equally over the 30-year period. This treatment complies with the requirements of FRS 102, Section 24.5(a) regarding government grants.

Changes in Estimates

Any changes to the useful economic life of the properties arising from revaluation, obsolescence, or revised estimates are accounted for prospectively in accordance with FRS 102, Section 10. Such changes are disclosed in the notes to the accounts as appropriate.

Grant Conditions

The organisation monitors compliance with grant conditions throughout the recognition period. Any events that could result in grant repayment obligations are assessed, with appropriate adjustments made to deferred income recognition and necessary disclosures included in the financial statements.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

The average monthly number of persons (including directors) employed by the company during the year was:

Land and buildings were revalued at 31 March 2025 by Aspin & Co, independent valuers not connected with the company on the basis of market value. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.

The revaluation surplus is disclosed in note 9.

Land and buildings are carried at valuation. If land and buildings were measured using the cost model, the carrying amounts would have been approximately £16,170,865 (2024 - £13,400,212), being cost £17,423,937 (2024 - £14,160,927) and depreciation £1,253,072 (2024 - £760,715).

Within other creditors, £107,579 of loans (2024: £99,185) are secured by fixed charges over the property and the interests of the company by way of legal mortgage with full title guarantee as a continuing security for the payment and discharge of the secured liabilities.

The other creditors are long-term loans secured by fixed charges over the property and the interests of the company by way of legal mortgage with full title guarantee as a continuing security for the payment and discharge of the secured liabilities.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

Deferred income is included in the financial statements as follows:

Grants were received to fund property acquisitions to be rented out for the purpose of social and affordable housing. The deferred income is to be recognised in the profit and loss account over the expected useful economic life of the properties of thirty years under the accruals method of FRS 102 paragraph 24.5.

Other deferred income relates to rental income received in advance.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006.

The auditor's report is qualified and includes the following:

Qualified opinion

In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 March 2025 and of its loss 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 qualified opinion

As explained below, we were unable to obtain sufficient appropriate audit evidence in relation to (1) intercompany transactions and balances and (2) the reliability of certain accounting records, and accordingly we have qualified our opinion.

(1) Intercompany transactions and balances (Dérive RP Limited) and related allocations

The Company has processed transactions relating to its subsidiary, Dérive RP Limited, through the Company’s banking arrangements. The managing agent provided combined information and management made manual apportionments of income and expenditure between entities. We were unable to obtain sufficient appropriate audit evidence to support the completeness and accuracy of the intercompany transactions and balances between the Company and Dérive RP Limited and any related allocation of income and costs. In particular, a number of items recorded in the subsidiary’s intercompany ledger could not be matched to the Company’s records at the date of signing and remain unresolved.

Accordingly, we were unable to determine whether any adjustments might be necessary to the intercompany balances, the related profit and loss account amounts and the associated disclosures.

(2) Reliability of accounting records

As described in note 10 to the financial statements, irregularities in the company’s accounting records were identified after the year end. Although extensive remediation has been undertaken, supporting documentation was not available for certain transactions recorded during the year, and we were unable to obtain sufficient appropriate audit evidence over those transactions from alternative sources.

The possible effects of these matters are material but, in our judgement, are not pervasive to the financial statements.

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’s 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 qualified opinion.

Emphasis of matter

We draw attention to note 10 to the financial statements, which describes irregularities identified after the reporting period, the investigation commissioned by the company’s shareholder, and the possibility of further prior period adjustments in subsequent financial statements. Our opinion is not modified in respect of this matter.

After the reporting date, the directors identified irregularities in the company’s accounting records and weaknesses in its financial controls. An independent review was commissioned through the internal audit function of the company’s shareholder, Salford City Council, and certain matters arising have been referred to the appropriate authorities. Investigations were ongoing at the date of approval of these financial statements.

The directors have undertaken a programme of remediation, including the reconstruction of the company’s bank reconciliations and the preparation of a property-by-property fixed asset register. The continuing review of transactions and balances, in particular intercompany balances with Dérive RP Limited, may give rise to further prior period adjustments in the financial statements for the year ending 31 March 2026. The financial effect of any such adjustments cannot presently be quantified. These are non-adjusting events and no amounts in these financial statements have been adjusted as a result.

Included in other creditors are balances totalling £5,925,783 (2024: £4,526,713) owing to Salford City Council, the beneficial owners of the company by virtue of their interest in the entire issued share capital of the company.

Included in other creditors is a balance of £60,942 (2024: £156,054) owing to Derive RP Limited, a wholly owned subsidiary of the company.

Included in deferred income is a balance of £9,987,923 (2024: £8,564,359) which is grants received from Salford City Council in respect of the capital expenditure of the company.

Included in Government grants released in the Profit and Loss Account is £359,476 (2024: £317,623) which has been released from the grant received from Salford City Council in respect of the capital expenditure of the company.

During the year the directors identified that the comparative information for the year ended 31 March 2024 was not prepared in accordance with FRS 102 in certain respects. Following a comprehensive review, the directors concluded that the matters described below represent prior period errors and the comparative information has therefore been restated. The opening statement of financial position at 1 April 2023 has also been restated for the cumulative impact of these corrections.

Nature of the prior period errors

(a) Classification and measurement of the housing property portfolio (investment property to PPE)

In the comparative financial statements, the Group’s affordable housing properties were presented as investment property and measured at fair value with movements recognised in profit or loss. Following detailed assessment of the requirements of FRS 102, the directors concluded that the properties are held primarily for the provision of social benefit (affordable/social housing) and are therefore required to be accounted for as property, plant and equipment (PPE) under the revaluation model.

As part of the restatement, the properties have been reclassified from investment property to PPE. Under the revaluation model, depreciation is charged during the year on the depreciable components (buildings) and, consistent with the Group’s accounting approach, accumulated depreciation is eliminated on revaluation at the reporting date. In addition, the prior year fair value movement previously recognised in profit or loss has been re-presented as a revaluation surplus in other comprehensive income with the corresponding movement recognised in the revaluation reserve.

In addition, during the review it was identified that two properties had not been revalued at 31 March 2024, resulting in an understatement of the year-end carrying value. This was corrected as part of the restatement. The correction increased the total carrying amount of the property portfolio at 31 March 2024 by £570,000, with the properties carried at their appropriate revalued amounts at the reporting date.

(b) Allocation of income and expenditure relating to Derive RP Ltd

In the comparative period, certain rental income and related expenditure that should have been recognised by Derive RP Ltd was recorded within Derive (Salford) Group Limited. This arose because the managing agent remitted receipts to Derive (Salford) Group Limited, who then allocated payments between entities. The comparative figures have been corrected to reflect income and expenditure in the appropriate entity, with the resulting intercompany balance reclassified accordingly.

The correction resulted in the removal from Derive (Salford) Group Limited of turnover of £386,533 and costs of £107,658, with a corresponding net impact on retained earnings and intercompany balances.

(c) Taxation impacts (current tax and deferred tax)

The corrections described above give rise to consequential taxation adjustments:

Current tax (FY24): the corporation tax position for the comparative period has been recomputed. The corporation tax charge and creditor at 31 March 2024 have been reduced from £151,499 to £81,780. The original FY24 corporation tax liability of £151,499 was paid in December 2024; the revised FY24 liability of £81,780 gives rise to an overpayment to be carried forward/set against future liabilities (or refunded), and the comparative creditor has been restated accordingly.

Deferred tax (FY24): deferred tax balances have been restated to reflect the revised measurement and presentation of revaluation movements and other temporary differences arising from the property portfolio. In particular, the deferred tax liability at 31 March 2024 increased by £142,119, consistent with the corrected year-end property valuations (including the two properties omitted from revaluation) and related timing differences.

Reconciliation of equity at 1 April 2023

Equity as previously reported at 1 April 2023        £3,395,514

Prior period adjustment (net)            £779,825

Equity as restated at 1 April 2023            £4,175,339

The adjustment at 1 April 2023 reflects the cumulative effect of applying the corrected accounting treatment to the opening balances, together with the reclassification of reserves required to present a revaluation reserve under the PPE revaluation model.