Notes to the Financial Statements 19-36
Note 19 Debtors Note 20 Creditors: amounts falling due within one year Note 21 Creditors: amounts falling due after more than one year Note 22 Deferred capital grant Note 23 Recycled capital grant fund
Note 24 Community benefit fund Note 25 Social Housing Decarbonisation Fund
Note 26 Loans and borrowings Note 27 Financial instruments Note 28 Pensions Note 29 Non-equity share capital
Note 30 Cash flow from operating activities
Note 31 Net debt reconciliation
Note 32 Capital commitments
Note 33 Operating leases
Note 34 Contingent assets/liabilities
Note 35 Related parties
Note 36 Post balance sheet events
19 Debtors
Social housing rental arrears were 2.4% at the end of the year (2024: 2.88%).
20 Creditors: amounts falling due within one year
21 Creditors: amounts falling due after more than one year
22 Deferred capital grant
In total, Settle Group has received a cumulative £107m social housing grant assistance.
23 Recycled capital grant fund
24 Community benefit fund
In 2003, Settle was the recipient of a Large-Scale Voluntary Transfer (LSVT) of housing properties from North Hertfordshire County Council. In exchange for receiving so many homes at significant discount, Settle agreed to restrict income from any subsequent sales to a predefined low value until 2030. The remaining proceeds from each sale are recognised here as a creditor, repayable on demand.
The signed agreement states that these funds can be spent, other than by agreement with North Herts District Council (NHDC) on developing new social housing or associated community facilities within the local area
25 Social Housing Decarbonisation Fund
The social housing decarbonisation fund is a government scheme whereby grants are given which will upgrade a significant amount of the social housing stock currently below Energy Performance Certificate (EPC) band C up to that standard. It will support the installation of energy performance measures in social homes in England. In the year Settle Group was part of a consortium with three other organisations namely B3 Living, Dacorum Borough Council and Watford Community Housing to utilise this government scheme.
26 Loans and borrowings
Debt analysis
Security
All borrowing is secured by fixed charges on individual properties.
Terms of repayment and interest rate
At 31 March 2025 the Group had undrawn loan facilities of £113m (2024: £145m).
The Group interest rate for the loans and borrowings are as follows:
- Bank loans are under six term loans of £68.4m, £54.6m, £75m, £20m, £150m and £50m at rates of SONIA+0.69%, 4.66%, 4.99%, SONIA+1.51%, SONIA +1.10% and SONIA+ 0.99% respectively.
- Harbour Funding Plc borrowing is at a fixed rate of 5.28%;
- GBSH bond is at a fixed rate of 5.19%; and
- Private placement borrowing is under three term loans of £20m, £30m and £25m at a fixed interest rate of 2.3%, 2.33% and 2.37% respectively.
The Group has entered into floating to fixed interest rate swaps with the fixed leg of 4.80%, 4.57% and 3.97% and the variable rate leg equal to SONIA plus margin. These has been accounted for under hedge accounting (see note 26).
Based on the lender’s earliest repayment date, borrowings are repayable as follows:
27 Financial instruments
Information regarding the Group’s exposure to and management of credit risk, liquidity risk, market risk, cash flow interest rate risk, and foreign exchange risk is included in our Treasury Management Policy.
The carrying values of the Group and Association’s financial liabilities measured at fair value through Statement of Comprehensive Income are summarised by category below:
Derivative financial instruments designated as hedges of variable interest rate risk comprise interest rate swaps.
Hedge of variable interest rate risk arising from bank loan liabilities
To hedge the potential volatility in future interest cash flows arising from movements in SONIA, the group has entered into a floating to fixed interest rate swaps with a nominal value equal to that initial borrowings, the same term as the loans and interest re-pricing dates identical to those of the variable rate loans. These result in the group paying a fixed rate and receiving SONIA (though cash flows are settled on a net basis) and effectively fix the total interest cost on loans.
The derivatives are accounted for as a hedge of variable rate interest rate risks, in accordance with FRS 102 and had a fair value of £3.6m (2024: £7.6m) at the balance sheet date. The cash flows arising from the interest rate swaps will continue until their maturity. The change in fair value in the period was £4.0m; £0.6m charge as movement in fair value of financial instruments in the statement of comprehensive income and £3.6m the financial instrument hedging reserves.
28 Pensions
Settle Group Stakeholder Pension Scheme (SPS)
The SPS pension scheme is defined contribution pension scheme administered by Legal & General. It is the current pension scheme offer to new employees in the company. The employer’s contributions to SPS by the Group for the year ended 31 March 2025 were £968k (2024: £1,615k).
Local Government Pension Scheme (LGPS)
The LGPS is a multi-employer scheme, administered by Hertfordshire County Council Pension Fund under the regulations governing the LGPS, a defined benefit scheme. The most recent formal actuarial valuation was completed as at 31 March 2020 by a qualified independent actuary.
The LGPS is closed to employees who join the Group after 31 March 2003. The liability in respect of past service for transferring members as at 31 March 2003 is to remain with North Hertfordshire Council (NHC). The market value of the scheme's assets as at 31 March 2003, and any deficit or surplus relating to revaluation of these assets, are reflected in the financial statements of NHC.
During the year, Settle entered into a new admission agreement with the Fund with an effective date of 30 September 2023. From the 30 September 2023 the liabilities for active members were transferred to the new agreement, whilst the liabilities in respect of deferred and pensioner members were retained by the Fund, with the previous admission agreement being terminated.
The termination costs due to this partial exit from the LGPS scheme was nil (2024: £2.7m). The decision for the partial exit was commercially based to help control future pension liabilities.
The assets that were transferred to the new agreement is the share of assets that was attributed to Settle in respect of the previous agreement less the cost of settling the deferred and pensioner liabilities. Settle now only retains responsibility for the liabilities in respect of those members who were active at the time the new admission agreement was put in place. Settle’s share of assets in the Fund has also been reduced to reflect the “payment” of the cessation cost in respect of the deferred and pensioner liabilities that were retained by the Fund following the termination of the previous admission agreement.
The employer's contributions to the LGPS by the Group for the year ended 31 March 2025 were £120k (2024: £130k) at a contribution rate of 21.2% of pensionable salaries.
New guidelines were issued for pension liability recognition, following a December 2018 tribunal appeal which overturned a previous ruling relating to age related entitlements. Settle is aware of the Virgin Media v NTL Pension Trustees II Limited Court of Appeal judgement which may give rise to adjustments to the LGPS. At present the legal process is incomplete and therefore we are unable to quantify any potential liabilities.Principal actuarial assumptions: Financial assumptions
Mortality assumptions
Base table mortality
The base table mortality assumptions adopted for the funds’ latest triennial funding valuations were best estimate assumptions and we will therefore be using the same assumptions as standard for accounting.
For employers participating in an English or Welsh LGPS fund, the last actuarial valuation was at 31 March 2022.
For England and Wales, the next triennial valuation date is as at the accounting date, 31 March 2025. The results of the 2025 valuation will not be finalised at the time of preparing reports, nor assumptions agreed with the relevant LGPS fund. An update to base mortality tables will follow next year as part of 31 March 2026 reporting.
Future improvements to mortality
To project future improvements in mortality, a model prepared by the Continuous Mortality Investigation Bureau (CMI) is used. The CMI update their model on an annual basis, incorporating the latest mortality data in the national population.
The CMI have released the 2023 version of their model and so we intend to further update our mortality assumptions to use the 2023 core model as standard for all employers. This represents a change from the last accounting date when the 2022 version of the model was used for most employers. The latest version of the core
model places no weight on the exceptional mortality experienced during 2020 and 2021 as a result of the Covid pandemic, but places some reliance on mortality data that has been observed since. Specifically, a weighting of 15% is applied to mortality in the 2022 and 2023 years’ data. The impact of updating the model is expected to be a slight reduction in life expectancies for all employers, largely reflecting the heavier than average mortality that was experienced during 2022 and 2023.
The assumed life expectations on retirement at age 65 are:
Amounts recognised in surplus or deficit
Amounts recognised in other comprehensive income
Reconciliation of opening and closing balances of the present value scheme liabilities:
Reconciliation of opening and closing balances of the fair value of plan assets:
While the calculations above would leave Settle in a surplus position of £2.369m (2024: £1.822m), LGPS cannot demonstrate that the Association could take advantage of the asset position in reduced payments or take ownership upon death of the final living scheme member. As a direct result, Settle cannot recognise the surplus as LGPS does not form a debtor to the Association. The pensions liability is therefore capped at nil, leaving a total movement in reserves of £0.056m (2024: £2.55m), comprised of the recognisable portion of the remeasurements.
Major categories of plan assets as a percentage of total plan assets:
29 Non-equity share capital
The shares provide the members with the right to vote at the General Meeting, but do not provide any rights to dividends or distributions on a winding up.
30 Cash flow from operating activities
31 Net debt reconciliation
32 Capital commitments
The above commitments will be financed primarily through a mixture of operating cashflows, borrowings and any Social Housing Grant obtained in the year.
33 Operating leases
The Group has entered into vehicle and IT equipment operating leases of £43,000 during the year to 31st March 2025 (2024: £40,000).
34 Contingent assets/liabilities
There are £2.4m of contingent liabilities as at March 2025 relating to fully amortised grants (2024: £2.4m).
35 Related parties
Related party disclosures
The ultimate controlling party of the group is Settle Group – Registered social housing provider. There is no ultimate controlling party of Settle Group.
Subsidiary and associated companies
Settle has no regulated subsidiary or associated undertakings. The following transactions that took place between the Group and its non-regulated associated companies during the year were:
Development costs are allocated on actual amount incurred on accrual basis.
Intercompany balances at the end of the year were as follows:
The intercompany balance due from the subsidiary undertaking is repayable on demand.
During the year no compensation (2024: nil) was paid to key management personnel for loss of office.
One of the current Board members is a Key Management Personnel of HACT, a charity that supplied goods and services totalling £11,440 (2024: £16,550) to Settle Group during the year.
36 Post balance sheet events
Prior to the financial year end in March 2025, the Board identified Paradigm Housing Group as a potential strategic partner, and Heads of Terms were subsequently signed. Post the balance sheet date of 31st March 2025, Settle has continued to explore this opportunity, with due diligence currently underway to assess the viability of the proposed partnership.