www.pwc.co.uk Northern Ireland Housing Association Consolidated Accounts October 2013 1
Background to consolidated accounts NI data from published accounts Number of Northern Ireland 1 Associations Period covered Cost of Housing Stock Number of people employed (FTE) England,Wales and Scotland data 2 3 4 5 2015 23 Associations 2014 26 Associations 2013 26 Associations 2012 30 Associations 2015 refers to years ends from 31 December 2014 to 31 March 2015 2015 3,436m 2014-3,275m 2013-3,045m 2015 2,954 2014 2,959 2013 2,853 Sourced from published 2011 accounts 2,825 for 2013/14 by regulators in each jurisdiction 2
Key financial highlights Income & expenditure account 2015,000 2014,000 Turnover 214,185 203,078 Operating costs 157,081 150,313 Operating surplus 56,328 52,139 Loss on sale of assets (548) (321) Interest receivable 980 1,091 Interest payable 30,189 27,715 Surplus before transfers 21,476 27,549* Turnover up by 5.5% Operating costs up 4.5% Operating surplus up 8% Interest paid up 8.9% Surplus down -20.1% *1 Association 10.8m goodwill on acquisition in 2013-14 excluding this from prior year results in an underlying increase in surplus of 28.2% 3
NI Consolidated Income and Expenditure trend 2011-12 to 2014-15 The sector has grown consistently throughout the period with turnover increasing by 23.8% over the 4 financial years with a corresponding increase in operating surplus of 35.8% representing increased economies of scale and operating efficiency. This has created headroom for interest costs to increase by 42.3% without impacting upon overall surplus levels. 250,000 200,000 150,000 100,000 50,000 0 2011-12 2012-13 2013-14 2014-15 Turnover Op Costs Op Surplus Int Payable Surplus (before transfers) 4
Key financial highlights Balance sheet 2015 000 2014 000 GBV up by 4.9% Gross book value 3,436,041 3,275,986 Capital grant 2,476,288 2,383,646 Depreciation 17,537 16,578 Net book value 958,849 891,548 Cash & Short Term Investments Total assets less current liabilities 160,857 132,005 1,090,983 1,017,982 Long term loans 691,172 641,687 Capital grant up 3.9% Depreciation up by 5.8% NBV up 7.6% Cash & ST investments up by 21.9% Loans up 7.7% 5
NI Consolidated Balance Sheet trend 2011-12 to 2014-15 The sector s balance sheet has grown over the past 4 financial years; GBV of housing is up 19.0%, total assets less current liabilities is up 33.7% and long term debt is up 47.7%. This growth has been sustainable with the underlying strength of the balance sheet remaining steady 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 Balance Sheet 000s 2011-12 2012-13 2013-14 2014-15 GBV Housing Capital Grant Total assets less current liabilities Long term loans 6
Rental income, operating surplus and surplus before transfers has increased year on year and continues to show a rising trend Trend in turnover, operating surplus and surplus before transfers 000s 250,000 200,000 150,000 100,000 50,000 0 Turnover Operating surplus Surplus before transfers 2011 2012 2013 2014 2015 7
Gross margin has remained steady between 2013 and 2015 2015 26.3% 2014 25.9% 2013 26.3% Gross margin remains steady The increase in turnover was not matched by an equal increase in operating costs. This led to an improvement in gross margin during 2015 compared to 2014. Gross margin is now at the level recorded in 2012-13. 8
Analysis of resources expended Wages and have remained steady as a percentage of the total expenditure but depreciation has increased Analysis of 2015 expenditure Analysis of 2014 expenditure Other costs 41% Wages & salaries 34% Other costs 42% Wages & salaries 34% Interest payable 16% Deprecia tion 9% Interest payable 17% Depreciat ion 7% 9
The Total Number of Units under management has increased by 4.2% from 44,210 to 46,074. Number of Units under management 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 7673 6804 6095 3757 4052 4236 34,644 33,354 31,617 2015 2014 2013 Equity sharing Rented - shared Rented - self contained 10
The sector now contributes over 60m through remuneration to the local economy. Average remuneration has increased by 6.6%. Pension costs as a percentage of the total remuneration package has risen over the 5 years from 7% to 9.4% Analysis of salaries and wages 2011 to 2015 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 18,023 19,245 18,939 19,920 21,233 2011 2012 2013 2014 2015 Salaries Social Security costs Pension costs Other 11
Growth in NBV of housing properties (before impact of HAG) Value in millions 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 3,436 3,276 3,044 2,845 2,655 2011 2012 2013 2014 2015 Source: Consolidated Accounts 12
Growth in NBV of housing properties with HAG contribution Value in millions 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 892 904 806 711 661 1,994 2,135 2,239 2,383 2,476 2011 2012 2013 2014 2015 HAG Other funding Source: Consolidated Accounts 13
The cost per house has remained steady between 2014 and 2015 at an average of 74k per unit 74700 Average GBV per unit 74600 74500 74400 74300 74,100 74200 74100 74577 74000 73900 73800 74100 2013-14 2014-15 Average GBV per unit 14
During 2014-15 the average decontrolled rent in the sector for rehab housing and new build was as follows 100.00 80.00 60.00 40.00 20.00 0.00 69.63 Rehab (decontrolled rent) 81.05 Rehab (Controlled rent) Rehab (decontrolled rent) New Build (decontrolled rent) Average 63.07 58.59 New Build (decontrolled rent) New Build (Controlled rent) Rehab (Controlled rent) New Build (Controlled rent) 79.62 Average 15
HAG represents nearly three quarters of cumulative financing for Housing Association properties in 2011-12 Source of Housing Finance 2011-12 17% 10% 73% HAG Borrowing Other (grants and HA reserves) 16
but borrowing is becoming an increasingly important source of finance rising from 17% to 20% of total cumulative financing in just 3 years, whilst HAG has decreased by 1% over the same period. Source of Housing finance 2014-15 20% 8% 72% HAG Borrowing Other (grants and HA reserves) 17
During 2014-15 there was over 120m* of housing capital additions, of which just over 50% was funded through HAG. 140000000 120000000 100000000 80000000 60000000 40000000 20000000 Split in source of finance for capital additions between HAG and Housing Association resources 2014-15 0 Additions HAG Housing Association *Excludes Choice, Co-ownership, Covenanter and Craigowen 18
Accounting policy for housing property Average useful economic life Asset type Structure Roof Windows and doors Primary heating unit Kitchen Bathroom Mechanical systems (plumbing) Electrics Lifts Average life 93 years (range 50 to 100 years) 73 years (range 40 to 100 years) 29 years (range 15 to 40 years) 15 years (range 10 to 20 years) 19 years (range 10 to 25 years) 26 years (range 15 to 30 years) 30 years (range 15 to 35 years) 33 years (range 25 to 40 years) 25 years (range 20 to 30 years) 19
Northern Ireland ratios Working capital Current assets/ Current liabilities Gearing Net Borrowing/Total capital and reserves plus HAG Net Borrowing plus pension liability/total capital and reserves plus HAG Return Operating Surplus/Total assets less current liabilities 2015 2014 1.60 1.80 % % 24.34 22.94 25.09 23.10 % % 5.23 5.14 20
How do we compare to England and Scotland and Wales Number of Units managed England 2,638,000 Scotland 285,000 Wales 157,000 N Ireland 46,074 21
Key financial highlights England m Scotland m Wales m Turnover 15,634 1,318 784 Operating costs 10,606 1,103 635 Operating surplus Surplus on sale of assets 4,139 204 150 630 14 11 Interest payable 2,638 131 96 Surplus before transfers 2,362 97 74 Turnover up by 5.1% Operating costs up 4.8% Operating surplus up 6.5% Interest paid up 4.9% Surplus up 18.6% 22
Key financial highlights England m Scotland m Wales m Gross book value 132,741 13,330 5,903 Capital grant 45,926 7,543 2,888 Depreciation 8,660 929 357 Net book value 78,155 4,858 2,658 Total assets less current liabilities 87,261 5,698 2,965 Long term loans 56,825 3,378 2,112 Cost up by 5.5% Capital grant up 1.5% Depreciation up 11.5% NBV up 7.7% Loans up 4.0% 23
Our profitability margins are strong both at operating and net profit levels compared to peers Profitability ratios Net margin 7.3 10.1 9.4 15.1 Operating margin 15.5 19.1 26.3 26.5 0 5 10 15 20 25 30 Northern Ireland Wales Scotland England 24
Growth in income and operating surplus year on year is similar to England. Interest payable has grown ahead of Scotland and England reflecting the need to privately finance development. Growth ratios Percentage increase year on year 14 12 10 8 6 4 2 0-2 -4-6 5.2 3.3 6.5 5.5 7.5 4.6 4.5-2.7-4.7 England Scotland Wales Northern Ireland 8 12.9 Income Operating surplus Interest payable 8.9 25
Development has continued, financed by HAG and loans. Borrowing was highest in Wales again but grew consistently everywhere else. Growth ratios Percentage increase year on year 14 12 10 8 6 4 2 0 7.4 10.3 12.6 4.1 1.1 2.4 4.3 3.1 10.3 9.9 12.3 12.2 7.2 NBV Capital grant Total assets less Current liabilities England Scotland Wales Northern Ireland 3.6 7.1 9.1 Long term loans 26
Debt servicing ability England 22,474 Scotland 12,184 Debt per unit Borrowing per unit reflects higher gearing and in NI has increased year on year reflecting increased borrowing to finance development Gearing England 93.8% Scotland 31.9% Wales 13,500 N Ireland 15,001 NI gearing is similar to Wales and has increased year on year. Wales 61.1% N Ireland 64.4% 27
Average rents in NI are comparable with Wales, lower than England but higher than Scotland reflecting NI s ability to generate larger surpluses than Scotland and Wales despite higher debt per unit levels Average weekly rent ( ) 2014-15 120 100 80 60 40 20 0 98.21 71.01 82.05 79.62 114.06 101.68 78.03 78.44 Weekly rent England Scotland Wales Northern Ireland London SE England NE England Yorkshire 28
In summary Sector well positioned financially with growth in surplus year on year at 8% ahead of GB 6.5% (England 7.5% up, Scotland 4.7% down and Wales 2.7% down) However, rent levels potentially higher than Scotland and Wales (based on small sample). Worth completing a complete exercise to benchmark against GB accurately? Sector has contributed to the NI economy with a 4.2% growth in units compared to the GB average of 2.3% growth in units managed Growth has been positive and so far it appears to be sustainable can this continue into the future? 29
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