Metropolitan Housing Association Bond Investor Roadshow December - PowerPoint PPT Presentation

Metropolitan Housing Association Bond Investor Roadshow December 2016 Brian Johnson – Chief Executive Officer Ian Johnson – Executive Director of Finance Donald McKenzie – Head of Corporate Finance & Deputy Company Secretary

1 . W ho w e are 2 . Governance 3 . Developm ent program m e 4 . Governm ent policy changes 5 . Financial perform ance and treasury strategy 6 . Appendices - Metropolitan Board - Governance Structure - Housing Stock and Tenant Profile Wavertree Court, Streatham, London - Housing dem and and Social Rent Levels - Risk Managem ent - Approach to Policy Changes

Metropolitan at a glance  One of the leading social housing associations and care Turnover – Breakdow n by FY1 6 providers in the UK. Member of the G15 7% Social housing lettings 11%  Owns and/ or manages c 38,000 properties Other social housing activities  Geographically focused in London with some diversification Non-social housing across the East Midlands and the East of England activities 82%  Turnover of c. £235m and very strong reported operating margin of c. 38% (adjusted for amendments to the Social housing lettings – Breakdow n by type FY1 6 pension scheme in FY 16) 1% 12% General needs  Financially stable and robust with over 80% turnover from Supported housing 18% social housing lettings (c. 90% group operating surplus) Low-cost home ownership  Clear and streamlined group and governance structure Other housing 70%  Refreshed and experienced Executive team with strong group Board oversight Social housing lettings – Revenue grow th 200  Ambitious but flexible development plan with a strong 190 emphasis on financial planning and approval processes 180 £m  A+ S&P / ‘G1’ / ‘V2’ ratings 170 160  Strong risk management culture across the organisation 150 2011 2012 2013 2014 2015 2016 3

Key financial highlights Strong operating perform ance in FY 1 7  Q2 results  Turnover broadly flat year-on-year  Operating margin consistent with FY 16  Operating surplus increased by c. 10% from FY16 with Operating Costs held at previous year levels  Continued focus on cost efficiency and Value for Money  > £97m invested in new development projects  293 new homes delivered YTD  Strong demand for sales products at or above anticipated prices  Liquidity remains strong  Despite uncertainties around the impact of Brexit and changes to the Regulatory environment the full year forecast remains in line with management expectations Standard & Poor’s ( S&P) Metropolitan Rating  Reduction from AA- following the Brexit vote and S&P downgrade of the UK Sovereign rating  Rating renewed in July 2016 – A+ Stable outlook  October 2016 - S&P instituted a sector review particularly focusing on exposure to sales  Metropolitan rating outlook changed from Stable to Negative  Ratings of peer group RPs either reduced further or with a less optimistic outlook 4

Key strategic highlights Strong operating perform ance in FY 1 6  Healthy revenue growth of c.2% , primarily driven by growth in social housing activities (including General Needs housing)  Significant increase in operating surplus to c. £90m (vs. £85m in FY 15), driven by a combination of positive growth and further cost control (excluding amendments to pension contribution scheme)  Surplus on ordinary activities reaching £68m (vs. £60m in FY 15 ) Significant progress in strategy im plem entation  Strategy evolved to ensure Metropolitan is well positioned to address new housing policy developments  Entering a more long-term approach towards strategic planning  ‘Metw orks’ initiative ( I n-House Contractor) : key milestone aiming at further improving cost efficiencies and the quality of service provided  Ongoing implementation of new housing m anagem ent system ‘SI D’ : providing greater data management functionality and integration between different businesses  Continued focus on I ndependence , core strategic objective embedded within Metropolitan’s mission  Remain committed to developing 1,000 units pa  Merger of CPH with MHT will provide the opportunity to further accelerate the delivery of the Clapham Park scheme Solid financial position  Continued commitment to our financial policy. ‘Frozen GAAP’ gearing of 62% (group accounting gearing is c.44% ) and interest cover of c. 2.7x (against target of < 70% and > 1.1x, respectively)  Strong liquidity and extended life of debt maturity  Increased diversity in source of funding with issuance of corporate bond in FY 16 5

Metropolitan’s strategic objectives Our m ission: “To be the leading provider of packages offering homes that are affordable along with access to services that enable customers to maximise their Independence” Key m easures: Developm ent: num ber of new affordable I ndependence: num ber I ndependence steps Financial strength: operating m argin hom es delivered taken by custom ers Key objectives ( three-year horizon) : 1. Deliver a large number of homes at a level that is consistent with maintaining delivery through downturns in the housing market - in excess of 1,000 per year 2. Remain top quartile in terms of operating cost per property, enabling future funding and supporting the development programme 3. Deliver a large numbers of Independence outcomes - in excess of 10,000 per year 4. Develop the ability to acquire other companies that would enhance our level of services without compromising our financial policy 5. Increase contribution from the Care and Support business 6. Deliver consistently and continuously high standards of operations and services 7. Build a strong external reputation as a thoughtful, analytical and innovative housing association and become one of the top influencers of the housing and care sector 6

Extensive geographical coverage Units ow ned and/ or m anaged in England – 3 7 ,8 3 1 in total of w hich 2 2 ,6 8 4 are in London Enfield Barnet Waltham Harrow Forest Haringey Redbridge Havering Islington Brent Hackney Camden Barking & Dagenham Hillingdon City of Tower Newham London Hamlets Ealing Southwark Hounslow Greenwich Lambeth Wandsworth Bexley Lewisham Merton Kingston Upon Thames Bromley Croydon Sutton Colour key (number of units) 3,000+ 1,000-3,000 500-1,000 200-500 100-200 0-100 As at March 2016 7

Robust operational performance as demonstrated by low levels of voids, arrears and bad debts Key highlights Evolution of voids  Further improvements in managing voids: decreasing to 2.2% 1.5% 1.6% 2.2% 1.4% Absolute # of voids at y/ e  Decrease of arrears for the fourth consecutive year to a record % gross rental income 5.0% 1200 low of 4.7% 1,037 1,045 1000 3.8%  Bad debts decreasing and expected to remain at very low levels 727 3.1% 800 on a sustainable basis, despite a challenging environment 2.6% 2.3% 2.2% 2.5% 600  Clear focus on collection rate and obtain top quartile 400 performance (key target of the organisation) 1.3% 390 200  Average re-let time of 73 days in FY 16 (vs. 100 in FY 15). In 0.0% 0 Q4, re-let time reduced to 54 days and trending downwards FY 13 FY 14 FY 15 FY 16  Expect further improvements in void and re-let times as ‘Metworks’ takes control of repairs within the group Excluding Care and Support and Supported housing units Evolution of bad debts Evolution of rent arrears 1.5% 8.0% % net rental income 6.6% % net rental income 6.2% 6.0% 1.0% 5.2% 0.9% 4.7% 1.0% 4.0% 0.4% 0.5% 2.0% 0.2% 0.0% 0.0% FY 13 FY 14 FY 15 FY 16 FY 13 FY 14 FY 15 FY 16 Note: FY15 figures not restated for FRS 102 8

1 . W ho w e are 2 . Governance 3 . Developm ent program m e 4 . Governm ent policy changes 5 . Financial perform ance and treasury strategy 6 . Appendices Clarence Avenue, Clapham, London