High Court ruling, relating to the inflation index applied to benefits earned before December 2003. Prior to 2011, pre-2003 benefits were inflated in line with RPI capped at 5% but in 2011 the Trustee changed its approach to apply increases in line with CPI. The Trustee is seeking a ruling on whether the pension increases should have continued to be indexed against RPI. The estimated impact on Anchor if the change is ruled not to have been valid is £8.7m. A contingent liability of £45.1m has been disclosed in Note 30 of the financial statements in relation to the above. A provision cannot be recognised at this time as neither the amount nor the timing is known. Anchor is no longer an active employer in the Surrey County Council Pension Fund (“Local Government Pension Scheme”, “LGPS”) which completes the aim to reach pension parity across the organisation. Anchor exited the scheme on 31 July 2023 and the final cessation position (which is a credit to Anchor) has been calculated by the scheme actuaries. An asset has been recognised in the accounts to reflect this actuarial valuation. Anchor also operates a defined contribution scheme, the Anchor Hanover Worksave Pension Plan, administered by Legal & General. Further details of the schemes are shown in Note 25. Treasury Anchor’s treasury activities are managed to ensure sufficient cash is in place to fund operations efficiently and to reduce the impact of adverse movements in interest rates and the financial markets. A treasury strategy is in place to finance delivery of the Group’s objectives and its operational and long-term plans are supported by financial budgets and forecasts. The treasury strategy and the policy that supports it are approved annually by the Board. Cash flow requirements are monitored through a rolling forecasting process in line with the golden rules set out in the treasury management policy. Anchor’s policy is to minimise cash held by repaying debt as early as practicable, while ensuring sufficient access to funding to cover investment and development plans and working capital. This is achieved using forecasts covering short, medium and long-term cash flows and the use of short- term investment and revolving credit facilities. The rolling forecasting process incorporates stress testing to ensure that the net debt position is sufficiently robust to withstand predictable and unpredictable shocks. We aim to maintain a strong investment grade credit profile in line with or ahead of rated social housing peers and our approach is underpinned by Golden Principles and Golden Rules.
Cash flow £163.2m of cash was generated from operating activities during the year compared with £72.6m in the prior year. £55.2m of the £163.2m relates to grants received and held in deferred income (2023: £18.4m). The movement in cash is fully analysed in Note 28 of the financial statements. Cash inflows from property sales proceeds were £14.2m compared with £24.7m in the prior year, reflecting the cyclical nature of the completion of developments and some development delays from supply chain constraints. The acquisition of Hadrian Healthcare (Skipton) Limited resulted in a cash outflow of £12.7m. Cash investment in the development of housing properties totalled £77.2m (2023: £47.8m), with most of the development investment being reflected in operating cash flow through the movement in stock. A further £46.9m was invested in the purchase of two care homes on a turnkey freehold basis. There were disposal proceeds of £8.9m (2023: £2.5m). Cash at bank was £55.8m (2023: £34.3m), a net increase in cash of £21.6m (2023: net decrease of £49.6m), with cash generated from operating activities including investment in new developments for sale exceeding capital expenditure on existing and new properties and the cost of the Hadrian Healthcare (Skipton) acquisition. Net debt was £801.8m at the year-end (2023: £755.1m), a net increase of £46.7m. Pensions Anchor operates or participates in one defined benefit pension scheme for its employees: the Anchor Trust Final Salary Scheme (“ATFSS”). The assets of the scheme are held separately from those of the Group and are managed by Trustees. The contributions are determined based on triennial valuations using the projected unit method. This scheme is closed to new members. Anchor is preparing for a pensioner buy-in as part of a plan to manage the future liabilities of the ATFSS. During due diligence, a query has arisen in respect of a change to the benefits specification of the scheme between 1988 and 1995. The scheme Trustee’s legal adviser has questioned the changes to the indexation of pension increases during this period. The Trustee has carried out a review into all the schemes under its administration and concluded that the uncertainty is widespread among the majority of schemes it administers. The Trustee intends to seek a High Court review of its administration practices, which may take up to a further two years to conclude. The estimated impact on Anchor if these pension changes are ruled not to have been valid is £36.4m. As part of its review the Trustee has identified a further potentially significant item on which it intends to seek a
18 Anchor Hanover Group Annual Report & Financial Statements 2024
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