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East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December 2015

East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Page 1: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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East Midlands Housing Group Investor Presentation

Presenting Team:

Chan Kataria - Group Chief Executive

Andrew Kilby - Executive Director Finance

December 2015

Page 2: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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2

Key highlights

Established in 1946, now one of the largest housing groups in England

Rated AA- by Standard & Poor’s

Long and successful track record of operations, services and development program delivery

Strong focus on low-risk social housing activities

Very high demand for social housing in areas of operations

High operating margin of c. 30%

Financially robust with strong coverage ratios (not relying on property sales)

Stable and experienced management team with strong group board oversight

Strong risk management culture at all levels of the organisation

Recognised “partner of choice” with key stakeholders

Our vision: “To be widely recognised as the best social housing and care businesses in the country, leading the market as service provider and employer”

Page 3: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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3

Agenda

1. EMH Group introduction and overview

2. Impact of Government policy changes on EMH

3. Financial performance

4. Funding and treasury strategy

5. Transaction highlights

6. Appendices

Page 4: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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4

Turnover – Breakdown by type FY 15A

Social housing lettings – Breakdown by type FY 15A

Established in 1946

Leading social housing provider in the UK

Owns and/or manages c18,000 properties

Providing over 10,000 hours per week of care and support

Annual turnover >£94m, employing over 1,100 people

Clear and streamlined group and governance structure

Stable and experienced management team with strong group

board oversight

Geographically focused on the East Midlands, a region

characterised by a very high demand for social housing

A reputation for high quality service delivery:

Investors in People (silver) and top 100 Apprenticeship

Employer

Highest rating for Governance and Viability from the Social

Housing Regulator (G1 / V1)

Key highlights

EMH Group at a glance

Core values: I DO ACE (integrity, diversity, openness, accountability, clarity, excellence)

78%

17%

5%

Social Housing Lettings

Care and Support

Other

67%

28%

5%

General Needs

Supported Housing &Housing for Older People

Low Cost Home Ownership

Page 5: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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History – a long and successful track record of operation

5

EMH Group – key milestones

Page 6: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Geographical profile and growth

Homes owned across the East Midlands Evolution of turnover

Evolution of housing units owned and managed

44.1

58.0

72.3

91.3 94.3

30.0

50.0

70.0

90.0

FY 11 FY 12 FY 13 FY 14 FY 15

£m

11,545

17,013 17,254 17,432 17,833

10,000

12,000

14,000

16,000

18,000

FY 11 FY 12 FY 13 FY 14 FY 15

Un

its

Page 7: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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7

Development programme – Overview

Development programme¹

High priority areas

Breakdown by funding

Breakdown by usage

Ashfield Mansfield

Erewash

South Derbyshire

NW Leicestershire

Charnwood

Leicester

Blaby

Harborough

Kettering

Wellingborough

Northampton

Daventry

Development programme – Priority areas

Other priority areas

83%

17%

Social and affordable rent

Shared ownership

22%

72%

Section 106 Developed

¹Breakdown from 3 year programme of identified units

Page 8: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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8

Development programme – current pipeline

Key highlights

Development strategy designed to reflect the specific needs of local authorities

Strong albeit flexible pipeline with currently 893 units

Development pipeline strongly linked to financial plan with regular monitoring controls

Focus on affordable rent and shared ownership

Currently 10 market rented units in pipeline

Grant funding of £13m secured via AHP2 15/18 programme to deliver 607 units; grant from OPS £2.5m

“Hello Homes” shared ownership sales brand

Currently only 14 shared ownership units unsold

Shared ownership sales over last 3 years 181, average sales price c£130k, average first tranche sale 32%

Pipeline – Developed vs. section106

Pipeline – Completed vs Committed

Year Completed Committed Pipeline Feasibility

Total Rent SO Rent SO Rent SO Rent SO

2015-16 82 48 52 20 5 0 0 0 207

2016-17 0 0 176 28 54 22 13 1 294

2017-18 0 0 162 17 73 13 123 4 392

Total 82 48 390 65 132 35 136 5 893

Year Completed Committed Pipeline Feasibility

Total Developed S106 Developed S106 Developed S106 Developed S106

2015-16 55 75 44 28 0 5 0 0 207

2016-17 0 0 158 46 76 0 14 0 294

2017-18 0 0 162 17 75 11 123 4 392

Total 55 75 364 91 151 16 137 4 893

Page 9: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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9

Streamlined group structure

Group structure amalgamation completed in September

2013

Legal structure based around two business divisions, EMH

Homes and Enable, as well as three specialist entities

Clear separation and ring-fencing of social housing

activities regulated by the HCA

Significant benefits achieved including:

More efficient governance and focused Executive

Management team

Higher degree of consistency in operational management

while maintaining local preferences

Holistic approach to asset management strategy

£1.3m efficiency savings and greater economies of scale

EMH Group – New legal structure Key highlights

Sharpes Garden Services Limited

EMH Treasury Plc

Special purpose vehicle (SPV)

Enable Housing Association Limited

Not registered with HCA Charitable C&CBS

Closed membership

Enable Care and Home Support Limited

Charity Commission registered Company limited by guarantee

EMH Housing & Regeneration Limited (EMH Homes)

Registered provider Charitable C&CBS

Closed membership

Midlands Rural Housing and Village Development Associated Limited

Not registered with HCA Non-charitable C&CBS

East Midlands Housing Group Limited (EMH Group)

Non-charitable C&CBS Registered Provider

Group parent

Main operating entities

Specialist entities

Enable

EMH Homes

Page 10: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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10

A strong governance structure in place

Subsidiary Boards Board committees

Sets strategic direction of the group

Set the long term strategic direction for the organisation

Ensure that the board fulfils its duties in terms of compliance and monitoring risk

Ensure an effective business plan and budget is in place

Ensure that performance is monitored and managed through internal controls and delegation

Approve key policies to allow the organisation to achieve its objectives

Operational delivery

EMH Homes Enable

Responsible for the delivery of the business plan

Audit

Treasury

Remuneration

Adherence to National Housing Federation’s (NHFs) revised

Code of Governance

Highest governance rating provided by the regulator

Strengthened governance structure :

Group and subsidiary boards reduced to 9 members

Independent board members (except for chief executive)

of each board nominated following an in-depth skills-

based selection process

Succession in place over the next few years; moving

towards harmonised board structure

Each Board member is appraised and the effectiveness of

the Board as a whole is evaluated on an annual basis

Clear separation between strategic role of the Board and

executive role of the management team

Systematic focus, review and identification of key strategic

risks

Subsidiaries’ Boards responsible for the operational delivery

of the business plan

EMH Group Board Key highlights

Page 11: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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11

A strong and stable executive management team

EMH Group – Executive Management Team

Chris Ashton

Executive Director Housing

Chan Kataria

Group Chief Executive

Key highlights

Highly stable and experienced senior

management team

Current Group Chief Executive only the

third one since creation in 1946

CEO has been a statutory appointee in

troubled organisations

CEO is sector representative on key trade

bodies

EMT has over 100 years of sector expertise

Track record of transformational change

Strong relationships with key stakeholders,

including the regulator and local authorities

Play a leading role in a range of organisations,

including National Housing Federation,

Chartered Institute of Housing, Placeshapers

and Health and Supporting People

commissioning bodies

Andrew Kilby

Executive Director Finance

Jim Patman

Executive Director Development

Margaret Mitchell

Executive Director Human Resources

Joanne Tilley

Executive Director Business Support

Joanna Grainger

Executive Director Care & Support

Page 12: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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12

High demand for social housing in areas of operations

Estimated population growth in the East Midlands

High level of demand for social housing in the East Midlands; housing associations in the area provide affordable homes for over 145,000² families

Average house price of £177k in the region represents over 7 times the average regional income22

Number of households expected to increase by around 22,0001 a year between 2012 and 2033, equating to a c.23% rise

The region is building just 45%1 of the new homes needed each year

64% of EMH Homes properties let on first offer

Tenant turnover 8.4% in 14/15

Key highlights

Affordability / Supply Data2 (selection of key local authorities)

4.50 4.544.58

4.90

4.624.66

0.89% 0.88%0.87% 0.87%

4.2

4.4

4.6

4.8

5.0

2011 2012 2013 2014 2015 2021

Millions

0.70%

0.75%

0.80%

0.85%

0.90%

Population % growth

Sources: 1. CLG statistics; 2. NHF 2015-16 Hometruths

0.01.53.04.56.07.59.0

10.5

No

rth

amp

ton

Bla

by

Har

bo

rou

gh

Leic

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r

Ch

arn

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od

NW

LDC

Erew

ash

Ash

fie

ldRat

io o

f h

ou

se p

rice

s to

in

com

es

0

750

1,500

2,250

3,000

3,750

4,500

No

rth

amp

ton

Bla

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Har

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Leic

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r

Ch

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od

NW

LDC

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Ash

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ld

Sho

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ll in

ho

me

s 2

01

1-2

01

4

Page 13: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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13

High demand for social housing in priority development areas

Affordable housing waiting list data (Dec 15)

Current data collected from LA’s in key priority development areas

c18,000 on waiting lists of the 6 Local Authorities

Total homes required annually from SHMA c5,000

Homes delivered in 14/15 c4,000

Numbers presenting statutory homeless in 14/15 576

Key highlights

Annual Homes Required per SHMA¹ New Homes Delivered in 2014-15

0200400600800

1,0001,2001,4001,600

Bla

by

NW

LDC

Leic

este

r

Ch

arn

wo

od

No

rth

amp

ton

We

llin

gbo

rou

ghNo

. of

Ho

me

s R

eq

uir

ed

Affordable

Other

¹Strategic Housing Market Assessment

0

200

400

600

800

1,000

Bla

by

NW

LDC

Leic

este

r

Ch

arn

wo

od

No

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ton

We

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No

, of

Ho

me

s d

eliv

ere

d

Affordable

Other

1,149 787

10,580

1,936 3,300

696

0

2,000

4,000

6,000

8,000

10,000

Bla

by

NW

LDC

Leic

este

r

Ch

arn

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No

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We

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No

. on

wai

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t

Page 14: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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14

Social and market rents in the East Midlands

Social and market rent in key areas of operations1 Key highlights1

Average EMH Group rents of c. £88 a week, just over two thirds of the £124 weekly cost of an equivalent home in the private rented sector

Private sector rents in the East Midlands expected to rise by 67% in the next 10 years, representing an increase of £342 per month

Average house price in the East Midlands in 2014 of £177,000 compared to £266,000 for England

Sources: (1) CLG data, valuation office agency rent officers’ data, Homes and Communities Agency, Regulatory and Statistical Return

sNote:: (1) Key areas defined as local authorities with over 500 units

-

20

40

60

80

100

120

140

160

No

rth

amp

ton

Bla

by

Har

bo

rou

gh

Leic

este

r

Ch

arn

wo

od

NW

LDC

Erew

ash

Ash

fie

ld

£ A

vera

ge W

ee

kly

Re

nt

Market Rent EMH Group

Page 15: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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15

High quality and well-maintained housing stock

Stock by property type1

EMH Group – Stock profile (as of November 2015)

Stock by no. of bedrooms (general needs)

Stock by age Stock by usage1

Note: (1) “Other” includes commercial properties, garage and caravans

Note: (1) “Other” includes commercial properties, garage and caravans

61% 8%

21%

4%

5%

General Needs

Shared Ownership

Housing for Older People

Supported Housing

Other

65%

30%

5%

Houses / Bungalows

Flat

Other

19%

34%

44%

2% 1%

1 Bedroom

2 Bedrooms

3 Bedrooms

4 Bedrooms

Other

16%

25%

17%

10%

13%

19%

Prior 1950

1950-1970

1970-1980

1980-1990

1990-2000

Post 2000

Page 16: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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16

Well-balanced tenant profile

Key highlights Age profile

Breakdown by economic status

Favourable age profile limiting level of bad debts and arrears

Low exposure to tenants below 24, traditionally the segment with high arrears

High percentage of retired tenants (c30%)

Strong emphasis on collecting tenants information which allows the group to plan the impact of welfare reforms and tailor services to meet individual needs

Current tenant arrears at lowest ever point (3.2%)

Breakdown by category

5%

32%

26%

22%

10% 5%

24 or less

25-44

45-59

60-74

75-84

Over 85

29%

19% 11%

14%

13%

11%

3% Retired

Full time employment

Job Seeker

Not seeking work

Long term sickness/disability

Part-time employment

Other

34%

22%

15%

11%

7%

11% Working age, no benefits

Working age, full benefits

Working age, partial benefits

Pension age, full benefits

Pension age, partial benefits

Pension age, no benefits

Page 17: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Agenda

1. EMH Group introduction and overview

2. Impact of Government policy changes on EMH

3. Financial performance

4. Funding and treasury strategy

5. Transaction highlights

6. Appendices

Page 18: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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18

Spending Review/Housing and Planning Bill

Spending Review Key Priorities

Increased focus on Low Cost Home Ownership

Funding for starter homes

Funding for elderly persons accommodation

Limited funding for rented properties

Impact on Development Programme

Increase proportion of Low Cost Home Ownership from 25% to 50%

Rented programme will be dependent on availability of funding – mainly RTB replacements and residual S106 schemes

Local Housing Allowance Restriction

General needs properties – worst case only £4k reduction

Under 35 lettings – worst case £186k reduction assuming all on housing benefit

Supported living / extra care will be impacted if included

Rent reductions will reduce future impact

Housing and Planning Bill

Pay to Stay:

Not a major issue in region

Not included in financial plan

Any impact will be marginally positive

ONS Reclassification

No change to governance arrangements

Government commitment to take action to reverse the decision

Supporting NHF in lobbying

Voluntary Right to Buy

Currently being piloted

Very restricted application (e.g. 10 tenancy)

National funding will be restricted

Estimated 5,600 EMH Group tenancies could be eligible

PRTB already available to c3,500 tenants resulting in approximately 20 sales per year

Page 19: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Budget July 2015: Rent reductions

Impact

Business Plan originally based on CPI plus 1%

Applies to all properties excluding Shared Ownership and Specialised Supported Housing

Assumption of CPI of 0.5% in 16/17 rising to 2.0% in 19/20

Rental income therefore reduced by 12% by 19/20

Rent reduction of £10m per annum by 19/20

Possible reduction in valuations in loan security

Board Objectives

Well placed after amalgamation in 2013 and £1.3m of resultant efficiency gains

Maintain financial viability and credit rating

Maintain cautious approach to financial planning

Continue to develop new housing

Maintain frontline services as far as possible

Implement organisational review to identify efficiency gains

Review reinvestment in existing properties

Page 20: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Budget July 2015: Mitigating action Actions underway New Business Plan produced, published on website

and submitted to Regulator

Assumptions reviewed

Development under AHP 15/18 programme protected; future development capacity maintained at 350 units per year with increased focus on shared ownership

Increased programme of disposals – extra 60 units per annum by 18/19

£1m annual reduction in capital reinvestment programme

Front loaded efficiency strategy agreed at Group Board on 4 December 15

Revised Financial Projections

Financial viability maintained

Average Group operating margins 28%; average operating margins for EMH Homes 33%

Group surplus in excess of £4.5m

EMH Homes interest cover low point 127% in 15/16 (exc. surplus on sales)

£1m contingencies in respect of efficiency gains

Failure to deliver efficiencies will not breach loan covenants

EBITDA MRI margins improved

Mitigating Actions as % Lost Revenue EBITDA MRI Margins / Interest Cover¹

28%

18% 29%

25%

Management (£3m)

Maintenance (£2m)

Reduced Surplus (£3m)

Other (Bad Debts, Sales &Interest, £3m)

¹ EBITDA MRI Group / Interest Cover EMH Homes

25% 30% 35%

FY15A

FY16F

FY17F

FY18F

FY19F

FY20FRevisedForecast

OriginalForecast

Actual

110% 120% 130% 140%

FY15A

FY16F

FY17F

FY18F

FY19F

FY20F

RevisedForecast

OriginalForecast

Actual

Page 21: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Welfare reform act: potential impact on EMH Group

Key highlights

Key risks identified by the group in relation to welfare reform: (Universal credit , Under occupation and Benefit cap. The application of Local Housing Allowance is also likely to impact on new single tenants aged under 35

Comprehensive and continuous assessment of potential impact on tenants and the organisation as whole

Use of an impact assessment tool as well as maximising the use of tenant profiling

Weekly dashboard to identify any emerging trends

1. Universal credit

17 tenants now in receipt of Universal Credit. Arrears on these tenancies currently c 12%

All but 6 local authorities are live. These will be live by February 2016

c.3,300 tenants potentially affected this financial year (i.e. tenants supported by full or partial housing benefits)

Highly conservative assumption in current financial plan: gradual increase of bad debt from 1.4% of social housing turnover in FY 2016 to 3.2% in FY 2021

Revert back to direct payment if arrears reach 8 weeks

Impact has been minimised through transfers and tenants entering employment

c1,100 properties in total under occupied but not all on benefits

Estimated potential impact on arrears overall is £109,000 and reducing

Proactive management of accounts

Government announced in July 2015 that the overall benefit cap was to be reduced from the current level of £23k per year to £20k per year

Estimated impact once introduced to be 3 times the previous level. This will still be low over all the stock – approximately 150 properties

2. Under-occupation 3. Benefit cap

Page 22: East Midlands Housing Group · East Midlands Housing Group Investor Presentation Presenting Team: Chan Kataria - Group Chief Executive Andrew Kilby - Executive Director Finance December

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Welfare reform act: a pro-active approach

Key initiatives…

Detailed Welfare Reform Strategy overseen by Executive Directors with an action plan in place to ensure that the Group is well prepared for the potential impact of the reform

Dedicated welfare reform group that focuses on impacts and takes early action

Reports on recent developments reviewed at each Executive Management and Board meeting

Comprehensive approach to address the impacts of universal credit including:

proactively targeting singles under 25 and couples who are transferring to UC now

tailored and targeted support and information based on personal circumstances

risk assessed interventions

digital inclusion project to prepare for on line paperless benefit applications

…combined with a change in culture and approach

Change in policy and cultural approach towards the collection of rents

Provision of advice and support to affected tenants

Stricter line on rent arrears (‘say it, do it’ approach)

“In-credit” approach from the outset of the tenancy

Centralised income recovery team

Maximise income collection through pro-active tenant profiling

Target contacts to tenants on a risk assessed basis

Rent arrears currently at the lowest level seen

Universal credit

Emphasis on accurate tenant profiling updated at each contact with tenants: age, gender, relationship with lead household, economic status

Close relationship with local authorities and DWP to regularly update and monitor the list of affected tenants

Cross organisational approach ensuring residents get early advice

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Agenda

1. EMH Group introduction and overview

2. Impact of Government policy changes on EMH

3. Financial performance

4. Funding and treasury strategy

5. Transaction highlights

6. Appendices

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Robust operational performance as demonstrated by low levels of voids, arrears and bad debts

Key highlights Evolution of voids

Evolution of bad debts Evolution of rent arrears

Consistently low levels of voids over the last 5 years demonstrating strength of demand

Level of bad debts and rent arrears maintained at very low levels on a sustained basis, despite the challenging economic environment

Emphasis on Income Team responding swiftly to any missed payments, frequent contacts with tenants, in order to minimise level of bad debts and arrears

Actual current tenant arrears now at lowest ever point (3.2%)

1.4% 1.3% 1.3%

2.0% 2.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

FY 11A FY 12A FY 13A FY 14A FY 15A

% g

ross

re

nta

l in

com

e

0.8% 0.9%

0.8%

1.0%

1.3%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

FY 11A FY 12A FY 13A FY 14A FY 15A

% n

et

ren

tal i

nco

me

4.0%

3.1% 3.2% 3.3% 3.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

FY 11A FY 12A FY 13A FY 14A FY 15A

% n

et

ren

tal i

nco

me

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Key financial ratio performance

Key Financial Ratios

Key Ratios Actual FY11 Actual FY12 Actual FY13 Actual FY14 Actual FY15

Turnover from Social Housing Lettings as % Total Revenues 86% 89% 90% 77% 78%

Social Housing Interest Coverage (x) 1.79 1.63 1.79 1.64 1.76

Recurrent Cash Interest Coverage (x) 1.89 1.73 1.96 1.84 1.92

Operating Surplus as % of Turnover 36% 31% 30% 25% 31%

Surplus before tax as % of Turnover 15% 10% 10% 7% 12%

Long Term Debt to Assets at Cost 47% 49% 47% 54% 48%

Net Capex as % of Turnover 65% 38% 28% 30% 29%

Debt to Revenues (x) 4.9 5.3 4.3 4.1 3.8

¹ FY12 and FY14 where relevant negative goodwill excluded

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Agenda

1. EMH Group introduction and overview

2. Impact of Government policy changes on EMH

3. Financial performance

4. Funding and treasury strategy

5. Transaction highlights

6. Appendices

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Capital structure

Key highlights Source of funding (Oct 2015)

Projected Debt maturity profile

Total debt: £360m as of October 2015; 97% Fixed

Repayable within 5 years: £36m

Weighted average hedged interest rate of 5.67%

Bank loans represent c.50% of gross debt; bond issue 42%

RCF of £80m, all undrawn. £50m secured and available to draw. £30m expiring 2016

New sources of funding - £50m retained bonds; £50m 5 year RCF

c1,000 unencumbered properties; estimated value for loan security purposes £50m (post retained bonds)

Charged Security¹

Revolving credit facility Breakdown of debt instruments

Total debt: 360m Total facility: 80m

50% 42%

8%

Bank Bond Other

62%

38%

Secured Not secured

-

100

200

300

400

500

15A 17F 19F 21F 23F 25F 27F 29F 31F 33F 35F 37F 39F

Fun

din

g £

m

Bond Other

¹Securing funding of £450m including retained bonds. LTV 73%

Valuation Basis MVT EUV Total

Unit Numbers 4962 9939 14901

Valuation (£m) 314 301 615

Average (£k) 63 30 41

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Agenda

1. EMH Group introduction and overview

2. Impact of Government policy changes on EMH

3. Financial performance

4. Funding and treasury strategy

5. Transaction highlights

6. Appendices

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Transaction highlights

Key highlights

EMH group intends to sell its £50m retained bonds to fund its development pipeline

c.1,100 units with a value of approximately £57m (combination of EUV and open market value subject to tenancy) are being offered as security for the retained element;

Retained bonds to be cash collateralised until property charging process completed (estimated completion date January 2016)

Headroom in charged security c£10m at last valuation

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Issue summary and bond structure

Issuer EMH Treasury Plc

Borrower EMH Housing and Regeneration Limited

Rating AA- (S&P)

Nominal amount £50m (retained element)

Maturity 29 January 2044

Security Initially cash to be replaced with social housing

property in January 2016

Covenants Asset cover ratios: 1.05x EUV-SH, 1.15x MS-ST

Use of proceeds General corporate purposes, including funding the development programme

Bookrunners Lloyds

Terms and Conditions Bond structure

EMH Housing and

Regeneration Ltd

Security trustee

Bondholders

EMH Treasury Plc

Bond trustee

Bonds

Benefit of issuer

security

Security trust deed & security agreement

Loan agreement

Bond trust deed

Security

Cash flows

Benefit of underlying security

East Midlands Housing

Group Ltd (Guarantor)

Guarantee

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Agenda

1. EMH Group introduction and overview

2. Impact of Government policy changes on EMH

3. Financial performance

4. Funding and treasury strategy

5. Transaction highlights

6. Appendices

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Historical – Consolidated income statement

Income statement

Note: FY 12A numbers includes only six months of TVH’s operations

Year end 31 March (£'000) 2010-11 2011-12 2012-13 2013-14 2014-15

FY 11A FY 12A FY 13A FY 14A FY 15A

Turnover 44,132 57,952 72,334 91,329 94,265

% Growth 31.3% 24.8% 26.3% 3.2%

Operating Costs -28,288 -40,181 -50,384 -68,236 -64,711

Operating Surplus before exceptional items 15,844 17,771 21,950 23,093 29,554

% Margin 35.9% 30.7% 30.3% 25.3% 31.4%

Negative Goodwill from acquisitions 0 48,382 0 9,158 0

Operating Surplus 15,844 66,153 21,950 32,251 29,554

Surplus on Sale of Properties 528 943 746 891 1,191

Interest Income 50 325 163 23 631

Interest Expense -9,646 -13,560 -15,653 -17,920 -20,455

Other Financing Costs (Pension Scheme) 25 85 -78 26 173

Surplus on Ordinary Activities before Taxation 6,801 53,946 7,128 15,271 11,094

Tax Expense -197 89 -72 -65 -99

Surplus on Ordinary Activities 6,604 54,035 7,056 15,206 10,995

% Margin (excl. Negative Goodwill) 9.8% 9.8% 6.6% 11.7%

Total Units (Owned and Managed) 11,545 17,013 17,254 17,432 17,833

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Historical – Consolidated balance sheet

Balance sheet

Note: FY 12A numbers includes only six months of TVH’s operations

2010-11 2011-12 2012-13 2013-14 2014-15

Year end 31 March (£'000) FY 11A FY 12A FY 13A FY 14A FY 15A

Tangible Fixed Assets

Housing Properties (Net of Depreciation) 437,009 595,224 613,948 642,657 682,208

Grant -190,814 -195,516 -197,323 -200,754 -219,269

Total Housing Properties 246,195 399,708 416,625 441,903 462,939

Other Tangible Fixed Assets 6,276 7,668 7,868 9,887 10,446

Investments 0 1,184 1,237 1,152 1,367

Homebuy Loan / Grant 0 0 0 0 0

Total Fixed Assets 252,471 408,560 425,730 452,942 474,752

Current Assets

Inventories 3,131 2,037 1,360 1,644 1,475

Debtors 2,660 5,733 4,479 6,266 6,202

Investments 17,812 12,942 5,021 35,565 27,815

Cash at Bank and in Hand 1,614 4,740 5,991 40,393 21,149

Total Current Assets 25,217 25,452 16,851 83,868 56,641

Creditors: Amounts falling due within 1 Year -11,384 -16,333 -16,924 -33,340 -30,899

Net Current Assets/(Liabilities) excl. Pensions 13,833 9,119 -73 50,528 25,742

Pension Asset/(Liability) 510 -4,193 -5,938 -5,280 -8,403

Net Current Assets/(Liabilities) 14,343 4,926 -6,011 45,248 17,339

Total Assets less Current Liabilities 266,814 413,486 419,719 498,190 492,091

Creditors: Amounts falling due after more than one year 214,560 308,374 309,127 371,579 357,358

Provisions for Liabilities and Charges 61 -28 3 6 47

Called up Share Capital 1 1 1 0 0

Designated Reserves 13,938 14,569 15,258 2,352 2,342

Revenue Reserves 38,254 90,570 95,330 124,253 132,344

Total Funds 266,814 413,486 419,719 498,190 492,091

Note: FY 12A numbers include only six months of TVH's operations

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Disclaimer

Your attention is drawn to the following: the information provided in this presentation is confidential and save where it is already in the public domain is not to be disclosed to anyone without our express consent. The information is preliminary in nature. This document sets out certain features of the Group and does not purport to provide a complete description of the Group or its finances. No representation or warranty express or implied is made as to the fairness, accuracy or completeness of the information contained herein and no reliance should be placed upon it