Presentation to Investors on the Amalgamation of Notting Hill Housing and Genesis Housing

Transcription

1 Presentation to Investors on the Amalgamation of Notting Hill Housing and Genesis Housing

2 Index 1. Introduction 2. Reasons for the merger 3. Governance and timetable 4. Development programme and enterprise profile 5. Asset quality and performance 6. Financial profile 7. Treasury policies 8. Other matters 2

3 Introduction (Conrad Court, Lewisham)

4 Introduction Notting Hill Genesis has been formed by the amalgamation of Notting Hill Housing Trust and Genesis Housing Association, organisations that can trace their roots back to the mid-1960s. The new merged organisation came into being on 3 April We estimate that Notting Hill Genesis is the third largest Registered Provider in London and the fifth largest in England. Most of our operations are in London, but a small proportion is in the wider South East. This presentation to investors sets out the reasons for the merger and gives some key information in relation to the new, combined, organisation. 4

5 Reasons for this merger

6 Reasons for the Merger Both organisations had separately concluded that to make a difference in the new world, it is necessary to be of significant size as mentioned earlier the new organisation is the third largest in London and the fifth largest in England. This will enable us to have influence at the centre of Government, both locally and nationally. This will improve the financial strength of the new organisation of the organisation over the early years of its operation. We intend to use that strength to increase the number of homes that we build and improve the services we provide to our residents. 6

7 Reasons for this merger Notting Hill Housing and Genesis were founded by people who understood the London housing crisis of their time. Both organisations started in West London in the 1960s, either side of the Harrow Road, but have developed into truly pan-london housing associations, owning or managing more than 64,000 homes between them. The geography - creating a major housing organisation for London - is compelling. Joining together increases our financial resilience and the first task will be to review the position carefully and stabilise the finances of the combined organisation. 7

8 Reasons for this merger - Geography Both organisations have a strong focus on London. 87% of our stock is in London. Looking at specific London Boroughs: Largest by social housing stock owned: Barnet, Hammersmith & Fulham, Hounslow, Kensington & Chelsea and Westminster. Second largest by social housing stock owned: Brent (Network is larger) and Camden (One is larger). Third largest by social housing stock owned: Ealing (Catalyst and A2 Dominion are larger) and Harrow (A2 Dominion and Home are larger). We expect to exit areas outside London where we have low levels of investment. The following maps explain the 31 March 2018 position. 8

9 Combined Stock Centred on London Number of homes owned and managed in London as at 31 March ,596 87% of total stock 9

10 Combined Stock Southern England Total owned and managed overall as at 31 March ,006 10

11 Enterprise Profile of new organisation We will have over 64,000 homes under ownership or management. 87% of our stock is in London, where the average population growth was 1.29% pa for the 10 years to 2016 and house prices average 484,500 against the UK average of 226,756 (214% of the average). In London, the average RP rent is less than half the average market rent ( pw vs pw). We have Board members and executives from each organisation, so that we understand the characteristics of each, and have the capability to deliver strategic aims - see governance slides. The average age of our housing is about 35 years, with void losses of less than 2% across our social housing stock. Our social housing has arrears of under 5%. 11

12 Governance and Timetable

13 Governance arrangements - Board This is a merger of equals and the governance arrangements reflect that. The new group was created by amalgamating Notting Hill Housing Trust and Genesis Housing Association and is called Notting Hill Genesis. This required two special general meetings of each Registered Provider which have been held and passed the required resolutions. The 12 member Group Board consists of four non executives from each of Notting Hill & Genesis, a resident from each, the Chief Executive and the Deputy Chief Executive. The names are on the following slide. The Group Board will be the Board of all the RPs in the Group. 13

14 Governance arrangements - Board The Board members are as follows. Non Executive Members Resident Members Dipesh Shah (Chair ex-gha) Stephen Bitti (ex GHA) Jenny Buck (ex GHA) Linde Carr (ex NHH) Jane Hollinshead (ex NHH) Bruce Mew (ex GHA) Executive Members Alex Phillips (ex NHH) Kate Davies (Chief Executive - ex NHH) Richard Powell (ex NHH) Elizabeth Froude (Deputy Chief Executive - ex GHA) Eugenie Turton (ex GHA) James Wardlaw (ex NHH) 14

15 Governance Sub Committees The sub committees are as follows: Treasury - chaired by Alex Phillips Audit and Risk - chaired by Bruce Mew Development and Assets - chaired by Richard Powell Resident Services - chaired by Eugenie Turton Remuneration - chaired by James Wardlaw Nominations - chaired by Dipesh Shah 15

16 Governance arrangements - Executive The executive team consists of the Chief Executive plus eight individuals. The executive team is drawn from former Notting Hill and Genesis staff in broadly equal proportions 16

17 Executive The executive team (with former organisations) is as follows: Chief Executive Kate Davies (NHH) Deputy Chief Executive Elizabeth Froude (Genesis) Group Director of Finance Paul Phillips (NHH) Group Director of Development John Hughes (NHH) Chief Operating Officer Andy Belton (NHH) Group Director of Housing Carl Byrne (Genesis) Group Director of Central Services Vipul Thacker (Genesis) Group Director of Commercial Services Mark Vaughan (NHH) Group Director of Regeneration and Jeremy Stibbe (Genesis) Strategic Asset Management 17

18 Key Events We have put in place some key plans and policies: The shadow Board approved a 30 year plan on 30 January 2018 (the Foundation Plan ). This has been submitted to the Regulator and Standard and Poor s. S&P have assigned an A+ (negative outlook) rating on the Group. The Regulator has issued a G1/V2 (compliant) rating on the Group. The Board approved a Treasury Management Policy on inception. 18

19 Development Programme & Enterprise Profile

20 Development Programme NHG will use the additional financial resilience created by the merger to support it s development programme. We will target completions of 2,700 homes per year. Type Homes Low cost rental 690 Shared ownership 970 Private sale 520 Market rent 520 Total 2,700 It will take some years to reach a steady state, but we expect to complete about 12,000 homes over the five years to We intend to keep most of our programme as social tenures (low cost rental & shared ownership), with a balance of about 60%/40% in favour of them. 20

21 Pipeline five years to March 2023 Completions 2,421 3,474 2,335 4,549 Low cost rental Shared ownership Market rent Private sale Total of 12,779 homes in the pipeline of which 12,013 are identified and the remaining 766 have yet to be identified. Expect to increase gradually to about 2,700 pa from 2024 onwards. 21

22 Risk Management We have put in place mechanisms, based on those in the antecedent organisations to ensure that the risk of development is well managed. These include: Limitations on new capital commitments in each year. Limitations on the amount of capital we will to put at risk, by reference to housing price reductions and reserves. Limitations on land bank ( 350m of which 134m was spent as at 31 March 2018) and work in progress. All schemes approved by the Executive, with larger ones referred to a specialised sub committee and very large ones to full Board too. Treasury policies to ensure that we have sufficient liquidity in adverse scenarios. Large commitments phased to reduce exposure over time. Sales programmes phased over time with the ability to finance and manage as market rent if needed. 22

23 Market sales risk peak years 2019/20 Total /21 Total < 400k 400k - 600k k - 800k 220 > 800k 264 Units < Outside London: 45 units. Private sales unit completions by price bands = None over 1m Outside London: 19 units 24

24 Largest schemes The three largest schemes are at: Grahame Park Aylesbury Estate Canada Water The following three slides summarise each. Note that each scheme has a number of phases, meaning that we are not committed to the entire expenditure now. 25

25 Grahame Park Masterplan c. 3,000 homes Stage A homes Stage B - 1,083 homes - delayed by Mayor calling in planning Stage B+ - 1,231 homes 26

26 Aylesbury Estate Signed up with LB Southwark April 2014 Demolition in progress for Phase 1 Review for CPO decision Construction expected to start ,538 homes, 820 in Phase 1 Capital investment (Phase 1) 352m Capital investment (total) 1,316m Expected completion: 2034

27 Canada Water Construction started April 2016 Capital investment: 589m Includes 42 storey tower In partnership with Sellar Group Designed by Macreanor Lavington and David Chipperfield Completed in phases from Mix of 1,030 homes: 162 Affordable Rent 69 Shared Ownership 453 Private Sale 346 Market Rent

28 Asset quality and performance

29 Welfare Reform Key Statistics 20% of turnover impacted by Universal Credit 44% 20% 6% Social housing rent via Housing Benefit from tenants of working age Social housing rent via Housing Benefit from tenants not of working age Social housing rent not from Housing Benefit Other turnover 30% 30

30 Grenfell Tower Notting Hill Genesis has reviewed its entire stock and established that seven sites of over 18 meters in height have Aluminium Composite Materials (ACM) cladding. All sites have had interim measures put in place as recommended by the Fire Service and Ministry of Housing, Communities & Local Government. Remedial works have commenced on four sites and are in the final stages of assessment for the other three. The combined cost to NHG of the remedial works is currently estimated at about 4m. One of these schemes is in charge to one of our public bonds but is being withdrawn now. We have reviewed our design standards and new homes will not have ACM cladding. In addition, we are fitting sprinkler systems to all new homes of five storeys and over that are being developed now. 31

31 Financial profile

32 Financial Highlights - pro forma basis Operating surplus of 211.7m Group surplus of 178.7m Gearing (Loans/Housing at cost) remains low at 42% Successful sales programme Committed, undrawn funding lines available of 596m (at 31 March 2017) Year ending 31 March 2017 Total assets of 7.6bn Reserves of 3.06bn 64,000 homes owned and managed VP value of housing properties of 17.7bn 33

33 Property Valuations As at 31 March 2017 Genesis Notting Hill Total Category bn bn bn Completed housing - cost (A) Housing under construction - cost Unsold housing for sale Housing for sale - land bank and under construction Investment properties at valuation Investment properties under construcion Total property - book value Estimated valuations Completed property (A) at VP value Completed property (A) at MV-T Completed property (A) at EUV-SH

34 Pensions 31 March 2017 Position Both organisations have defined benefit (DB) schemes that are closed to new members. Genesis has transferred its former participation in the Social Housing Pension Scheme to a new scheme (Genesis 2016 scheme). It also continues to operate the PCHA 2001 scheme. Genesis also has membership of the LPFA scheme. Notting Hill Housing continues to be a member of the SHPS DB scheme and has a liability to a LGPS scheme (LB Richmond). Registered Provider Scheme Net Liability per accounts ( m) Genesis Genesis Genesis PCHA Genesis LPFA 2.9 Notting Hill SHPS 23.7 Notting Hill LGPS 0.9 Total

35 Treasury Policies

36 Summary of Debt and Liquidity Position Group Debt Position (as at 30 April 2018) Facilities Drawn Undrawn 'm 'm 'm Notting Hill Genesis 4,004 3, Summary of Group Debt Position Average life of drawn debt: 16.2 years Average cost of drawn debt: 4.06% Total Borrowings: 4.0bn Undrawn facilities: 757m Cash Balance: circa 62m 'm 1,400 1,300 1,200 1,100 1, Debt Maturity Profile 0-1 years 1-2 years 2-5 years 5-10 years years > 20 years 37

37 Summary of Loan Covenants New Loan Covenants (effective from merger date) Interest Cover 1 Year (EBITDA Sales to Net Interest ) 105%. Interest Cover 3 Years (EBITDA MRI Sales to Net Interest) 110%. Gearing (Net Debt to GBV Total Assets (incl. Housing Properties, investments properties and stock) - 75%. Prudent interest rate management is optimised with the use of derivatives, but only to hedge existing exposures. Maintain prudent level of variable rate debt (greater flexibility for sales receipts). c11,869 unencumbered properties with security value of 2.2bn based on a mixture of EUV-SH and MV-T. 38

38 Other treasury matters Group Debt Mix Position (as at 30 April 2018) Actual Fixed 73% Floating 24% Indexed linked 3% Group Duration: Actual (current): 15.5 years Target liquidity: Highest of sufficient to meet: all contractual commitments. A minimum cover of 125% of 12 months net cash requirements. 12 months net cash requirements after reducing all property sales income by 50% plus any collateral shortfalls on derivatives resulting from a 50 basis point parallel adverse (typically, downward) shift in the relevant yield curve. 39

39 Business Planning Policies Our base plan has: All loan covenants met with at least 10% margin. Operating margin at least 27%. Adjusted EBITDA at least 30% of turnover - five year average. Debt/Adjusted EBITDA below 20 times - five year average. Adjusted EBITDA over interest payable to be maintained above 1.5 times - five year average. Social housing rental operating surplus to cover net interest paid 100% each year. All rental operating surplus to cover net interest paid 120% each year. 40

40 Other Matters Treasury Policies

41 Listed Bonds The two antecedent organisations had a different approach to Bond issues. Notting Hill issued bonds directly from its parent, Notting Hill Housing Trust. These bonds are, therefore, now direct obligations of the new parent, Notting Hill Genesis. Notting Hill had four bonds in issue maturing in 2032 ( 250m), 2042 ( 300m), 2049 ( 400m) and 2054 ( 250m). Genesis issued bonds through its treasury vehicle, Genfinance II plc. Genfinance II remains in existence with the security package for investors in place. Genfinance II had one bond in issue, maturing in 2039 ( 250m). All required documentation in relation to the amalgamation has been submitted to the Trustees for these bond issues. 42

42 Ratings At its meeting on 31 January, the shadow Board of Notting Hill Genesis took the following decisions. They decided to seek a rating for the new organisation from Standard and Poor s. They decided not to seek a rating from Moody s and Moody s were asked to withdraw their rating on the Bonds. They decided not to seek a rating from Fitch for the time being. Standard and Poor s have now issued a rating on the new organisation and all underlying bond issues. A copy is on the Notting Hill Genesis website and this will be kept up to date. The rating is A+ (negative outlook). Moody s will not rate Noting Hill Genesis, but they have decided to continue to rate all existing bond issues on an unsolicited basis. The rating is Baa1 (stable). 43

43 Communications We intend to publish the following. audited financial statements for the year to 31 March 2018 for Notting Hill Housing and Genesis Housing Association by 31 July unaudited abbreviated pro-forma financial statements for Notting Hill Genesis, using the accounting policies of the new organisation, in September summarised unaudited half year results for Notting Hill Genesis by Christmas audited financial statements for the year to 31 March 2019 for Notting Hill Genesis by 31 July Note that the Notting Hill accounts will be audited by PwC and the Genesis accounts will be audited by BDO. A firm will be appointed to audit the NHG accounts later in