Nominal Growth Rates

Ratio 5. Growth in Income from Social Housing Lettings %

The annual growth in turnover calculated as a percentage.
Growth is an important factor in the analysis of profitability and cash flow. If turnover does not grow over and above the rate of inflation the business is bound to struggle in the long run. Growth will be driven by the rate of rent increases, the mix of housing and the impact of development activity.

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Ratio 6. Growth in SBIT %

The percentage annual growth in surplus, before payment of interest and tax.
To quantify the change in the surplus before interest from one period to another. Changes in this figure are important and depend on the relative movements of operating costs and revenues. It will also be effected by income from other activities and exceptional items. An important comparison can be made with the change in interest paid: if growth in interest paid is greater than growth in SBIT this will reduce the interest cover.

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Ratio 7. Growth in Interest Paid %

The percentage annual growth in the net interest paid.
This is caused by changes in the level of debt and in interest rates. Interest paid accounts for a sizeable portion of the operating surplus of associations. Growth in interest paid without the attendant growth in surplus will lead to erosion of the bottom line and of interest cover.

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Ratio 8. Growth in Total Assets%

This is the annual growth in total assets (ie. fixed and current) from one year to the next. Total assets include all the operating, financial and other assets employed in the next business net of grants received.
This is the main driver of business growth for traditional rental activities though not quite the case for businesses that are not 'asset-based.' Asset growth through the development programme is also the main driver of cash flows. Deficits have to be funded from the operating surplus or through increased debt.

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Ratio 9. Growth in Total Capital & Reserves %

The annual percentage growth in the total capital, reserves and SHG.
This reflects the effect of the surplus for the year after tax, but before allocations. This is ploughed back into the business to enable the association to grow. This ratio should be compared to the change in debt. If debt levels grow faster than total capital and reserves then gearing levels will increase.

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Ratio 10. Growth in Total Debt %

The percentage change in the total debt from one year to the next.
The funding of growth in the asset base is by a mix of retained surplus and extra debt. By their very nature housing associations do not have large surpluses and hence debt tends to predominate. Growth in debt is therefore a means of ultimately increasing volume and profits but it tends to depress net surplus in the short term because of interest payments.

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