Arhag Annual Report 2019/2020

75 % of the second phase concluded in the first quarter of the following year £2.1M Operating surplus in 2019/20 Surplus and Operating Surplus We completed the financial year 2019/20 with an operating surplus of £2.1m, a decrease of £0.8m from the previous year. Whilst our underlying position for social housing rental income and operating costs has broadly remained the same (explained in further detail later), our new stream of income as landlord to our partners is offset by the significant reduction in surplus gained from disposals and transfers of housing properties in the previous year, when we acquired 47 units and did a stock swap. As a result, our surplus overall of £1.9m in 2018/19 reduced to £0.8m in 2019/20. Turnover Social Housing Turnover has broadly remained the same at £6.7m (2019: £6.7m). This takes into account 1% reduction in rents, the loss of rent from the handing back of 29 temporary social housing units (TSH) to the London Borough of Newham and the first phase transfer of 11 units to Ekaya Housing Association, and is offset by the increases in rent due from the full year effect of the new properties completed in Siva Court at the end of 2018/19. Cost of Sales Cost of sales units sold at Siva Court of £1.0m is contained within the net surplus on sale of housing properties. These costs were previously as properties held for sale, in current assets. Operating Costs Our operating costs have decreased by £0.3m since last year; we are pleased to report that our underlying operating costs are lower than in previous years, when taking into account £0.4mone-off costs associatedwith themove to the Stratford office from the Kentish Town office. We do not expect any further officemove costs going forward, and will seek to ensure that our expenditure is focused in the right areas of the business, to ensure fire safety and health and safety compliance, that our stock meets with the decent homes standards, and that our business is adequately resourced to run and growour service to our customers. There has been a drive to ensure that boilers and gas certifications are up-to-date and, during the financial year, the maintenance department undertook fire risk assessments and concentrated on bringing properties transferred to us in previous years up to an acceptable standard. Surplus on Sale and Disposal of Assets We completed on the first phase of the stock transfer to Ekaya, as well as the disposal of a property in De Laune Street, and the sale of three of the ten units we built at Siva Court in 2018/19. Further transfers are expected to happen in future years, as we continue rationalise our stock. Net Interest and Other Income Our Net Interest Cost during the year 2019/20 increased, due to the full year effect of additional loans at the end of the previous year to acquire properties from another Registered Provider. During the financial year Arhag received the second £0.5m of the £1.0m grant in respect of the Tampon Tax Fund for projects supporting the improvement of lives of disadvantaged girls and women. We spent slightly more than this during the year, to ensure the work started was completed fully. Our Debt and Liquidity At the end of the financial year, our drawn and committed debt was £31.0m. Our total liquidity at the year end of £3.0m comprises immediately available bank deposits. Arhag’s loan facilities are held with four banks. During Covid-19, Arhag has a small re-financing risk in the financial year 2021/22, with the majority of debt falling due after five years. We have reviewed our cashflow to understand any potential impact relating to our business model, supply chain, legal and contractual issues, employees, consumers and working capital. Our business model has adjusted to carry out more of our work remotely and digitally during lockdown, and it is likely that this will continue. The ability to collect income combined with the extended period of not being able to evict tenants during lockdown has been factored into worst case cashflow scenarios, and we have made assumptions around the longer term cost of repairs, as we resume as many services as possible. We have maintained our staffing levels, and when we return to the office, the costs to ensure our office is a safe place to work have been factored into our cashflows. We are confident that our access to finance has not been affected by any breaches of covenant terms. Annual Report 2019-2020 15