Investor update 2017 Paul Gray Gosia Motler Picture location Chief Financial Officer Head of Treasury Contact us - Investors@bpha.org.uk
Contents 1. Executive summary 2. Operations 3. Strategy 4. Development Activities 5. Financials and Treasury 6. Conclusions 7. Appendices
Executive summary Pilgrim’s House, Bedford
Executive Summary A strong, cash generative organisation £30.9 m 508 18,186 44.5% New social homes Homes owned or managed Operating margin on social Underlying surplus built/acquired last housing lettings year, of which 169 were shared ownership £10.3m £59.9m £244m £141m EBITDA-MRI First tranche shared Year end facility headroom Year end security headroom ownership surplus £22.8m A+ Risk V1/G1 Invested in maintaining and Stand alone credit HCA viability and HANA award for risk improving our existing homes – profile rating from S&P management approach governance ratings 100% of our homes continue to meet maintained the Decent Homes Standard
bpha A housing association that builds places and houses aspiration • bpha’s operations focus on developing and managing affordable homes for rent, sheltered homes, residential care and shared ownership, operating in the arc between Oxford and Cambridge Units by area • Our goal is to help people achieve their housing aspirations in a Bedfordshire - 10,187 sustainable, value for money driven Cambridgeshire & Peterborough - 3,568 manner Buckinghamshire & Milton Keynes - 1,050 • Oxfordshire - 1,247 We have been developing around 500 new homes a year and are one of the Northamptonshire - 1,201 top 25 developing housing Other - 933 associations in the UK Building locations 2016/17 • A simple corporate structure, shown within Appendix 1, reflects bpha’s 59 Bedfordshire straightforward nature of operations. 306 Cambridgeshire 59 • 94% of our turnover comes from Oxfordshire 136 59 social housing activities Other 7 59
bpha Financial Track Record bpha has an excellent history of revenue and surplus growth • The last five years has seen a step change in our net surplus and this represents an important shift in our ongoing financial performance • This is a consequence of our strict development criteria and operational efficiencies with new units completed being managed at incremental cost, resulting in a higher proportion of rental income flowing through to bottom line surplus • While development has continued and the organisation has grown, our gearing level has largely remained at the same level
Operations Wixams, Bedfordshire
Surplus Generation A conservative but commercial operating model Core business is still social housing • £84m of revenue from social housing lettings Strong operating surplus • Increase of 13% YoY - £54.9m surplus in 16/17 • Social housing lettings contributed £37.3m, margin of 44.5% • Strong margins attributable to: ❖ Tight geography, high yielding area ❖ 47% of stock < 20 years old ❖ Commercial cost control Strong existing lettings cashflow • Sufficient cashflow generated from existing lettings to fund capital expenditure on existing properties and meet all finance costs, including finance costs relating to new developments
Existing Operations- asset base A young well invested profit generating asset base • Low maintenance costs have been retained as nearly half of our stock is under 20 years old. The weighted average age of all our stock is less than 30 years old • A well maintained asset base with £22.8m spent on maintaining and improving our existing homes in 2017/18 • Our repair and maintenance projections are underpinned by detailed stock condition data, based on full survey every five years • All stock has a positive net present value
Existing Operations - Demographics Well placed to manage a welfare reform due to favorable tenant demographics • Our tenant demographic is well diversified with the majority of tenants being of working age and a younger age profile than the average across the sector • The majority of our tenants are economically active with only 21% of tenants in receipt of full housing benefit. This means bpha has been well positioned to manage the impact of Welfare Reform • Our strategy to cope with the Welfare Reform has been one of pro-active communication, customer support and income protection. We will continue to provide this support. Further details can be found in appendices to this document
Value for Money A new approach to benchmarking
Strategy Earith, Cambridgeshire
Corporate Strategy
Operating Model • We restructured the organisation to work through a new operating model. We now have seven business units along with a number of support services • We are investing in our support infrastructure to continuously improve our customer offering and provide a foundation for future growth • Our new business units will help inform decisions through improved metrics, facilitate clearer reporting, and help deliver greater Value for Money during the year ahead and in years to come
Development Activities Wootton, Bedfordshire Wootton, Bedfordshire
Development A strong track record of profitable sustainable development • Organic growth from 7,280 units in 1991 to 18,186 in 2017 • We have a highly selective approach to development with strong focus on quality of schemes • Strict development criteria ensure profitability and balance sheet enhancement • Extensive sensitivities carried out on new schemes to ensure robustness Development criteria ❖ IRR must achieve a strict hurdle rate ❖ Asset value generated > net development cost ❖ Conservative assumptions including no capital appreciation ❖ 35 year NPV and no terminal value
Development Strategy Bpha benefits from strong demand and market values in our areas of development • We aim to build 600 affordable units per year • At 31 March 2017, we were building 27 developments across 15 locations • We have tightened the geographical spread of our development activities to enable us generate further operational efficiencies and drive value for money • Across our operating region, high property values make it difficult for economically active aspiring home owners to get on the property ladder • This ensures high demand for our shared ownership properties which in turn supports the development of much needed affordable homes
Financials and Treasury Longford Park, Oxfordshire
2017 Financial Statements- Group Statement of Comprehensive Income • The last financial year has seen bpha achieve our strongest ever financial results against a challenging external environment • Operating surplus has gown from £35.5m in 2013 to £54.9m in 2017 • Our focus on strategic long term sites and strict appraisal criteria have enhanced earnings from new developments • Total operating margin has been maintained around the 40% mark, reaching 45% in 2017
2017 Financial Statements Group Statement of Financial Position • Housing fixed assets have increased by £153.5m from 2013-2017 • Long term debt has increased to support our development programme. However, b pha’s long term loans as a multiple of turnover has reduced from 7.5x in March 2013 to 6.1x in March 2017 Five year summary FRS 102 Previous UK GAAP Debt vs Turnover & Assets 2017 2016 2015 2014 2013 8.0x 1,050m Group statement of financial position £'m £'m £'m £'m £'m 7.5x 1,000m Housing Fixed Assets 1,008.2 982.3 936.2 894.2 854.7 Other assets less current liabilities* 109.5 114.5 134.4 29.9 54.4 7.0x 950m Total assets less current liabilities 1,117.8 1,096.8 1,070.6 924.1 909.2 6.5x 900m Debt (due over one year) 737.8 752.4 698.7 613.7 592.3 6.0x 850m Other long term liabilities 185.9 175.4 222.4 46.4 44.0 Total long term liabilities 923.7 927.8 921.1 660.1 636.3 5.5x 800m Reserves: total 194.1 168.9 149.5 264.0 272.9 5.0x 750m Total Long Term Funding and Reserves 1,117.8 1,096.8 1,070.7 924.1 909.2 2012/13 2013/14 2014/15 2015/16 2016/17 * Includes £7.97m debt payable within 1 year. Total debt at YE was £745.77m Debt as a multiple of turnover Housing Fixed Assets
Very Strong Liquidity Liquidity £250m £45m £200m • “Very strong liquidity” (Standard & Poor’s Nov 2017) £56m £150m • £751m of drawn debt (Mar 17), £953m of debt facilities in place (incl. £3m overdraft) £32m £100m £202m • 91% of drawn debt at fixed rates of interest £126m £50m £100m £0m 2014/15 2015/16 2016/17 Committed Undrawn Cash
Loan Facilities • Maturity profile of loan facilities is spread out over a 30 year period • Majority of future debt expected to be raised through capital markets with banks used for short term funding • The maturity profile of loan facilities is shown below, with amortisation of the syndicate facility spreading out refinance risk
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