TAKING A STAND Business Plan 2016-19 - Connect Housing · Business Plan 2016-19 ... with current market forecasts supplied by ... 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23

TAKING A STANDBusiness Plan 2016-19

Welcome to Connect’s Business Plan 2016-19

Index

1 Taking a Stand 1

2 Our Values 2

3 Strategy 2016-19 3

4 Financial Plan 2016-19 4

5 Key Strategic Risks 23

6 Risk Management Strategy 25

1

STRATEGY

Invest intackling socialand economicinequality

Invest in good homes

Invest in health and wellbeing

PURPOSE

We will do this

by... Ensuring everyemployee contributesto our overall purpose

1

FOUNDATIONS FOR SUCCESS

Working in partnershipwith others to make

a positive impact

2

Delivering excellentinternal and external

communication

3

Supportingambition, innovation

and creativity

4 5

Keeping our valuesat the heart of

everything we do

6

Seeking out and achieving value for money and value

for the community

We invest ourenergy, skillsand resources to:• Create truly

affordable homes• Support people

to enjoy healthy fulfilledlives

• Build safe, neighbourly places to live

VISION

Our passion isfor a fairer society,where people’shomes, healthand happinessmatter

VALUES

We create solutions

We give respect to people

We include the whole community

We love making a difference

Taking a Stand

VALUES

2

Connect loves making a difference

We will/I will…

• Go the extra mile to help my customers and colleagues

• Treat people with warmth and friendliness

• Make Connect an enjoyable place to work with energy and enthusiasm

Connect includes the whole community

We will/I will…

• Consistently treat people with fairness

• Offer people equal consideration, valuing the different contributions they make

• Work co-operatively with people who share our values

Connect creates solutions

We will/I will...

• Look to and plan for the future, seeking to improve the way we serve our customers and do our jobs

• Keep learning with enthusiasm

• See challenges as opportunitiestofindnewsolutions

Connect gives respect to people

We will/I will…

• Actively listen and give full attention to the people I am with

• Be open, honest, straight-forward and genuine

• Take personal responsibility for doing what we promise and so build trust

3

STRATEGY

Invest intackling socialand economic

inequality

• Maximise the potential of our community bases in East Leeds and North Kirklees

• Build relationships and support people so they can create for themselves the lives and neighbourhoods they want

• Deliver economic and digital inclusion programmes, expand apprenticeships to 10% of our workforce and promote

the Living Wage

Invest in good homes

• Focus on housing, its environment and its management

• Make our housing a positive choice

• Anticipate future needs and preferences

• Ensure affordable whole house costs

• Optimise asset value and return

• Create truly affordable new homes in our neighbourhoods especially in East Leeds and North Kirklees

• Add new homes with support for people in the community where needed

Invest in health and wellbeing

• Expand our support services creatively and cost effectively, with individual solutions and quality at the heart of our services

• Find new ways to tackle mental ill-health, loneliness and isolation

4

Financial Plan 2016-19IntroductionOverall levels of surpluses over the next 30-year life of the draft Business Plan are broadly in line with the October update at £69.5m, but incorporate the updates noted below.

Key pointsIncome Projections

Total incomehasincreasedfrom£592mto£607moverthe30yearlifeoftheBusinessPlanreflectingthe following:

Rental Income

• Decrease of1% p.a. in rents from 2016/17 until 2019/20.• Rent formula of CPI+1% p.a. applied thereafter.• In line with the updated assumptions regarding the negative impact of Welfare Reform, Void rent

loss forecasts are higher than past estimates of £1.4m, and now stand at £1.8m over the next 5 years of the Business Plan.

Surplus on Property Sales

The Business Plan assumes a modest programme of disposals, with the surpluses of £36k p.a. envisaged for years 2 and 3 ear-marked for further development.

Expenditure Projections

Total costs are projected to increase by £15m over the 30-year life of the Business Plan (£513m now comparedto£498m)reflectingvariousincreases/decreasesoveranumberofheadings.

Salaries

The overall salary bill has increased by £3m over the life of the Business Plan, rising from £226m to £229m,reflectingCPI+1%increases.

Office overheads

Overheads have increased by £2.9m over the life of the Business Plan, rising from £56.6m to £59.5m, reflectingCPI+1%increases.Furtherbenchmarkingworkison-goingtoreviewoptionstoreducetheoverall level of overheads.

5

Major Repairs

• The Plan includes an additional £2.5m of Major Repairs Revenue spend over the 30-year life of the Plan in line with the Budget.

• The Plan is able to fully accommodate 95% of current planned capital expenditure over thenext30years(from£58.5mto£60.1m),howeverthesefiguresaresubjecttoanon-goingvalidation exercise.

Depreciation of Housing Properties

The Plan includesanadditional£7.1mofdepreciationreflectingtheincreaseinMajorRepairsspendnoted above and Development activity noted below.

Development activity

The BusinessPlanhasbeenupdatedtoreflect£11.6mofapprovedoranticipateddevelopmentactivity– see Appendix A, Section 4. The following schemes are noted as committed in the Business Plan: • 10 units Boggart Hill, phase 2 (£1.1m spend)• 16 units Empty Properties AHP2 (£1.36m spend)• 15 units Owl Lane (£1m spend)• 23 units Lindley Moor (£1.1m spend)• 9 shared ownership units Owl Lane (£0.8m spend)• 3 shared ownership units Lindley Moor (£0.3m spend)

Interest Payable

Interest payable is approximately £5.3m lower with both short and longer term rates reduced in line with current market forecasts supplied by Capita Treasury Solutions.

6

Value for Money

A key measure in the Association’s Value for Money Self-Assessment is how we benchmark using HouseMark’s dashboard (as published on our web-site). This will be looked at in further detail by ARMC before coming back to Board, but the dashboard below (based on 2014/15 audited accounts) demonstrates a mixed picture both in terms of performance and cost. Work will commence shortly to update for the 2015/16 results but it is clear based on this Business Plan update that further work is required to improve our overall benchmarking position going forward.

Balance Sheet

• Peak debt is £45.2m compared to £43.4m in the revised 2015-20 Business Plan, and peaks in 2017-18 in line with the additional Development activity. A bullet repayment of £2.75m is required by one of the Association’s lenders (THFC) during 2016/17.

• Based on current committed/likely development activity debts are still forecast to be repaid in 2041/42.

Loan covenants

The proposed2016-21BusinessPlansatisfiesallexistingloancovenants,althoughfurtherdiscussionsarerequiredtofinalisearrangementswithregardtothenewFRSaccountingrequirements.

Cashflow

• Proposed drawdowns will be part funded from existing loan facilities (£1.5m) and the new £10m Bank of Scotland facility.

• Following discussion at the board seminar cash balances assumed now to be a minimum of £1m (£0.5m).

7

Business Plan assumptions

• Year 2 projections (2016-17) have been updated in detail in all major budget areas such as Rents, Maintenance, Services, Development activity, Salaries and Treasury.

• Appendix A shows the underlying assumptions used for the 2016-21 Business Plan, with a summary of the main changes on page 1.

Stress testing / Sensitivity Analysis

Appendix B demonstrates the sensitivity of surplus levels, meeting the tightest loan covenant (EBITDA-MRI), and repaying the association’s loans to changes in key risks such as Welfare Reform and other keyassumptionsareassuchasDevelopmentactivity,inflation,interestrates,rentalincome,andvoids.

• The inclusion of Major Repair expenditure into the loan covenant measurement is now a pre-requisite by most lenders, but does mean much lower headroom is available to the Association. Years 6 to 10 present the greatest challenge when the level of Major Repairs spend is forecast to increasesignificantly.

• Sensitivities of particular note are highlighted below and assume all other things being equal. A possiblefinancialmitigationisshownforeachscenarioundereachgraph.

• Graph 1–Inflation;demonstratesthesensitivityoftheBusinessPlanontheEBITDA-MRIloancovenanttohigherlevelsofinflationwhenthemajorsourceofincomeisbeingreduced by 1% p.a.

• Graph 2–Rentincreases;demonstratesthatafurtherextensionoftheRentsatminus1%pa policy or indeed a Rent freeze following the initial 4 years would be catastrophic for the association;

• Graph 3 look at material deterioration in terms of Voids and Bad Debts assumptions.• Graph 8 – considers the impact of Right to Buy assuming a ‘worst case’ scenario of 100

p.a. for 4 years from 2019/20.

• Looking at the Summary of Possible Financial Mitigations it is clear that some scenarios (Graphs 1 to 8) would be more manageable than others and that a further extension of the minus 1% rent cuts would present by far the greatest challenge.

• Potential mitigation in most instances where headroom is limited would typically include some / all of the following:

• Reducingdiscretionaryspend;• Re-profilingMajorRepairsspend;• DelayingorstoppingDevelopment;• Restructuringteamsandoperations;• Closing down any loss-making activities• Selling assets.

• Following approval of the Budget and Business Plan, Management Team will review options for future cost savings that might be used in the event that some of the scenarios materialise. It is anticipated that any such proposals will form the basis of a discussion at the next Board seminar.

• Graph 9 demonstrates the capacity of the Association to develop up to a further 30 units in addition to those included in the attached Business Plan.

Risk assessmentThe Business Plan has been prepared on a challenging but prudent basis, factoring in the latest expectations on the adverse impact of Welfare Reform. Longer term projections are driven by the Business Plan assumptions made on key areas of risk, and given the high level of uncertainty, in particular relating to Welfare Reform, revenue and capital funding, it is quite likely that some of the key assumptions will need to be revisited over the coming months. Further stress testing of possible mitigations including reviewing business income streams and a review of discretionary areas of ‘non-core’ activity is also planned.

TheintroductionofEBITDA-MRIhasclearlysignificantlyreducedtheheadroomavailabletotheAssociation, and the following list represents just some of the key longer term risks where changes in assumptions can make a material difference to the Business Plan projections:

• The impact of Welfare reform (Void rent loss and maintenance spend, arrears and bad debt provision,staffinglevelsetc);

• SupportedPeoplefunding;• Asset Management projections (Maintenance, Major Repairs, Development, funding requirements

etc);• Operationalperformance(arrearsandvoidlevelsetc);• Staffcosts(rewardstructures,pensionprovisionetc);• Implementation of new accounting requirements (International Financial Reporting Standards

(IFRS));• ReviewofTreasuryassumptions–on-goinggivencurrentmarketconditionsandtherefinancing

exercise.8

9

Income and Expenditure Account for the period ending 31 March 38

Connect Business Plan 2016-21 v3 Board 23.03.16 BP 2016-21 v3 Board 23.03.16INCOME & EXPENDITURE ACCOUNTFOR THE PERIOD ENDED 31 March 2038\\connect-file.connecthousing.local\data\ADMIN\BOARD\Board Papers\April 2015 - March 2016\2016 - 03 - 23 March\[xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final.xlsx]16. I&E 2016-21 v1 MT 29.01.16

2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23 2023.24 2024.25 2029.30 2034.35 2039.40 2044.45Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 15 Year 20 Year 25 Year 30

£ £ £ £ £ £ £ £ £ £ £ £ £Income From LettingsRent Receivable 12,812,765 12,894,912 12,940,633 12,882,150 13,226,582 13,617,585 14,020,203 14,474,437 14,861,676 17,194,141 19,894,505 23,084,234 26,641,049Service Charge Income 876,150 898,054 924,995 952,745 981,328 1,010,767 1,041,090 1,072,323 1,104,493 1,280,410 1,484,346 1,720,764 1,994,837Supporting People Grant - Block Subsidy

Gross Rental Income 13,688,915 13,792,966 13,865,628 13,834,895 14,207,909 14,628,353 15,061,293 15,546,760 15,966,169 18,474,551 21,378,851 24,804,998 28,635,886Less Voids (247,545) (397,899) (397,925) (396,543) (407,438) (419,661) (432,251) (446,313) (458,575) (531,615) (616,287) (716,201) (828,238)

Net Rental Income 13,441,370 13,395,068 13,467,703 13,438,352 13,800,471 14,208,691 14,629,042 15,100,448 15,507,594 17,942,937 20,762,564 24,088,797 27,807,648Supporting People Grant - Block Gross 1,316,700 1,336,451 1,363,180 1,390,443 1,418,252 1,446,617 1,475,549 1,505,060 1,535,162 1,694,942 1,871,353 2,066,125 2,281,169Other Income 36,500 37,412 38,535 39,691 40,882 42,108 43,371 44,672 46,013 53,341 61,837 71,686 83,104

Total Turnover From Social Housing Lettings 14,794,570 14,768,931 14,869,417 14,868,486 15,259,605 15,697,416 16,147,963 16,650,181 17,088,768 19,691,220 22,695,755 26,226,609 30,171,921

Salaries 5,122,800 5,220,120 5,376,724 5,538,025 5,704,166 5,875,291 6,051,550 6,233,096 6,420,089 7,442,643 8,628,063 10,002,290 11,595,395Office Overheads 1,418,000 1,453,450 1,444,266 1,433,223 1,476,220 1,520,506 1,566,121 1,613,105 1,661,498 1,926,132 2,232,915 2,588,560 3,000,850Depreciation of Other Fixed Assets 383,311 323,047 336,392 282,005 261,237 320,090 344,884 358,514 366,743 408,705 456,180 509,895 570,668Less: Management Costs Capitalised (76,041) (77,942) (80,280) (82,689) (85,169) (87,724) (90,356) (93,067) (95,859) (111,127) (128,826) (149,345) (173,132)Care & Support CostsDirect Housing Management Costs 153,700 157,543 162,269 167,137 172,151 177,315 182,635 188,114 193,757 224,618 260,394 301,868 349,947Direct Service Costs 707,500 690,188 711,943 734,351 757,432 781,205 805,691 830,912 856,889 1,033,944 1,198,624 1,389,534 1,610,851Direct Current Maintenance Costs 2,125,933 1,807,434 1,837,484 1,906,774 1,969,043 2,018,269 2,068,726 2,120,444 2,173,455 2,459,065 2,782,206 3,147,811 3,561,459Major Repairs 150,000 153,000 156,825 160,800 165,832 171,778 182,527 189,480 194,217 219,738 248,614 281,284 318,247Bad Debts 165,433 244,335 238,394 237,289 214,480 190,482 196,196 202,601 207,924 243,346 282,104 327,868 379,124Depreciation Of Housing Properties 1,836,364 1,991,680 2,143,152 2,213,605 2,229,731 2,313,808 2,369,047 2,392,495 2,401,983 2,772,425 3,203,503 3,459,506 3,588,554Other Costs 122,000 125,050 128,801 132,666 136,646 140,745 144,967 149,316 153,796 178,291 206,689 239,609 277,772

Total Operating Costs 12,109,000 12,087,904 12,455,969 12,723,186 13,001,766 13,421,765 13,821,988 14,185,010 14,534,492 16,797,779 19,370,465 22,098,879 25,079,736

Surplus (Deficit) On Social Housing Lettings 2,685,570 2,681,026 2,413,449 2,145,301 2,257,838 2,275,651 2,325,975 2,465,170 2,554,275 2,893,442 3,325,290 4,127,729 5,092,185

Other ActivitiesLeasehold/SO 450,500Commercial 22,200 22,533 22,984 23,443 23,912 24,390 24,878 25,376 25,883 28,577 31,552 34,836 38,461Student Housing 384,000 389,760 397,555 405,506 413,616 421,889 430,327 438,933 447,712 494,310 545,758 602,561 665,276Surplus Deficit On Sale Of Properties 36,000 36,000

Surplus Before Interest 3,127,770 3,579,819 2,833,988 2,574,250 2,695,367 2,721,930 2,781,180 2,929,479 3,027,871 3,416,329 3,902,599 4,765,126 5,795,922

Interest Collected 11,101 5,000 5,000 15,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 343,710Interest Payable (2,037,509) (1,946,344) (2,067,185) (2,189,199) (2,280,479) (2,219,540) (2,065,361) (2,190,505) (2,155,112) (1,852,621) (1,329,079) (483,719)

Retained Surplus 1,101,362 1,638,475 771,803 400,051 439,888 527,390 740,819 763,974 897,758 1,588,708 2,598,521 4,306,407 6,139,633

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10

Balance Sheet for the period ending 31 March 38

Connect Business Plan 2016-21 v3 Board 23.03.16 BP 2016-21 v3 Board 23.03.16BALANCE SHEETFOR THE PERIOD ENDED 31 March 2038\\connect-file.connecthousing.local\data\ADMIN\BOARD\Board Papers\April 2015 - March 2016\2016 - 03 - 23 March\[xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final.xlsx]22. BS 2016-21 v1 MT 29.01.16

2015.16 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23 2023.24 2024.25 2029.30 2034.35 2039.40 2044.45 2049.50Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 15 Year 20 Year 25 Year 30 Year 35

£ £ £ £ £ £ £ £ £ £ £ £ £ £ £

Housing Properties at cost 162,013,082 167,774,593 173,431,990 175,351,585 177,320,090 179,747,543 182,253,264 184,883,547 187,602,805 190,390,509 204,317,355 220,088,909 237,949,909 261,213,089 283,496,051Social Housing Grants (73,378,800) (73,863,600) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400) (74,878,400)Other Capital Grants (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000) (10,004,000)Depreciation (21,001,826) (22,838,190) (24,829,870) (26,973,022) (29,186,627) (31,416,358) (33,730,166) (36,099,212) (38,491,708) (40,893,691) (54,012,928) (69,333,104) (86,116,473) (105,160,283) (123,969,558)Net Book Value Of Housing Properties 57,628,456 61,068,804 63,719,719 63,496,163 63,251,063 63,448,786 63,640,699 63,901,934 64,228,697 64,614,418 65,422,027 65,873,405 66,951,035 71,170,405 74,644,093

Other Fixed Assets Tangible 2,183,787 2,718,087 2,674,571 2,624,698 2,636,375 2,676,163 2,664,623 2,636,003 2,601,659 2,567,191 2,399,871 2,241,720 2,093,944 1,957,905 1,835,147Other Fixed Assets IntangibleOther Fixed Assets InvestmentsHomebuy LoanHomebuy GrantTotal Fixed Assets 59,812,243 63,786,890 66,394,290 66,120,862 65,887,439 66,124,949 66,305,321 66,537,937 66,830,356 67,181,609 67,821,898 68,115,125 69,044,979 73,128,310 76,479,240

Current Assets 3,725,652 3,269,145 3,024,775 2,778,314 2,660,749 2,702,480 2,747,045 2,642,092 2,686,004 2,727,763 2,960,711 3,223,299 3,522,000 19,403,549 52,488,820

Total Current Assets 3,725,652 3,269,145 3,024,775 2,778,314 2,660,749 2,702,480 2,747,045 2,642,092 2,686,004 2,727,763 2,960,711 3,223,299 3,522,000 19,403,549 52,488,820

Current Liabilities 2,585,000 2,610,850 2,650,013 2,703,013 2,757,073 2,812,215 2,868,459 2,925,828 2,984,345 3,044,032 3,360,857 3,710,658 4,096,866 4,523,271 4,994,057

Total Current Liabilities 2,585,000 2,610,850 2,650,013 2,703,013 2,757,073 2,812,215 2,868,459 2,925,828 2,984,345 3,044,032 3,360,857 3,710,658 4,096,866 4,523,271 4,994,057

Net Current Assets Excl Pension 1,140,652 658,295 374,763 75,301 (96,324) (109,734) (121,414) (283,736) (298,341) (316,269) (400,145) (487,359) (574,866) 14,880,278 47,494,763Pension AssetNet Current Assets Incl Pension 1,140,652 658,295 374,763 75,301 (96,324) (109,734) (121,414) (283,736) (298,341) (316,269) (400,145) (487,359) (574,866) 14,880,278 47,494,763Total Assets Less Current Liabilities 60,952,895 64,445,185 66,769,053 66,196,163 65,791,115 66,015,215 66,183,907 66,254,201 66,532,015 66,865,340 67,421,752 67,627,766 68,470,113 88,008,588 123,974,003

Deferred LiabilitiesOutstanding Loan Balance 41,830,400 44,106,128 45,206,321 43,896,628 43,126,529 42,945,741 42,622,043 41,986,518 41,535,358 41,005,925 35,156,936 24,666,190 7,666,768Loan FeesDeferred PremiumOther Long Term Creditors 507,867 623,067 243,267 243,267 243,267 243,267 243,267 243,267 243,267 243,267 243,267 243,267 243,267 243,267 243,267

Net Assets 18,614,628 19,715,990 21,319,465 22,056,268 22,421,319 22,826,207 23,318,597 24,024,416 24,753,390 25,616,149 32,021,549 42,718,309 60,560,078 87,765,322 123,730,736

Share Capital and ReservesProvisions 749,000 749,000 714,000 679,000 644,000 609,000 574,000 539,000 504,000 469,000 399,000 399,000 399,000 399,000 399,000Revaluation ReserveRestricted Reserves 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000Designated Reserves 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000 2,810,000Pension ReserveGoodwill ReserveTotal Stockholders EquityRetained Surplus 10,445,628 11,546,990 13,185,465 13,957,268 14,357,319 14,797,207 15,324,597 16,065,416 16,829,390 17,727,149 24,202,549 34,899,309 52,741,078 79,946,322 115,911,736

18,614,628 19,715,990 21,319,465 22,056,268 22,421,319 22,826,207 23,318,597 24,024,416 24,753,390 25,616,149 32,021,549 42,718,309 60,560,078 87,765,322 123,730,736

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11

Cash Flow for the period ending 31 March 38

Connect Business Plan 2016-21 v3 Board 23.03.16 BP 2016-21 v3 Board 23.03.16CASH FLOWFOR THE PERIOD ENDED 31 March 2038\\connect-file.connecthousing.local\data\ADMIN\BOARD\Board Papers\April 2015 - March 2016\2016 - 03 - 23 March\[xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final.xlsx]19. CF 2016-21 v1 MT 29.01.16

2015.16 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23 2023.24 2024.25 2029.30 2034.35 2039.40 2044.45 2049.50Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 15 Year 20 Year 25 Year 30 Year 35

£ £ £ £ £ £ £ £ £ £ £ £ £ £ £Operating ActivitiesCash Received From Customers 14,926,357 14,883,758 15,959,759 15,298,023 15,177,712 15,440,922 15,908,649 16,511,924 16,867,977 17,312,679 19,921,919 22,935,890 26,471,479 30,429,247 35,052,752Cash Paid To Suppliers (5,225,730) (4,937,242) (4,632,559) (4,343,308) (4,433,201) (4,572,012) (4,700,850) (4,837,941) (4,974,787) (5,113,066) (5,864,762) (6,727,857) (7,718,989) (8,857,303) (10,164,826)Cash Paid To Employees (5,135,400) (5,122,800) (5,220,120) (5,376,724) (5,538,025) (5,704,166) (5,875,291) (6,051,550) (6,233,096) (6,420,089) (7,442,643) (8,628,063) (10,002,290) (11,595,395) (13,442,241)Net Cash From Operating Activities 4,565,227 4,823,716 6,107,079 5,577,992 5,206,485 5,164,745 5,332,508 5,622,433 5,660,094 5,779,524 6,614,514 7,579,970 8,750,200 9,976,549 11,445,686

Returns On Investments And Servicing Of Finance

Interest Collected 12,295 11,101 5,000 5,000 15,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 343,710 1,134,254Interest Paid (2,053,170) (2,037,509) (1,946,344) (2,067,185) (2,189,199) (2,280,479) (2,219,540) (2,065,361) (2,190,505) (2,155,112) (1,852,621) (1,329,079) (483,719)Net Cash From Investment Returns And Finance Servicing (2,040,876) (2,026,408) (1,941,344) (2,062,185) (2,174,199) (2,255,479) (2,194,540) (2,040,361) (2,165,505) (2,130,112) (1,827,621) (1,304,079) (458,719) 343,710 1,134,254

Provisions for tax

Investing ActivitiesAcquistion And Construction Of Properties (3,253,082) (5,905,511) (5,801,396) (1,919,596) (1,968,504) (2,427,454) (2,505,721) (2,630,283) (2,719,258) (2,787,705) (2,925,642) (3,313,192) (3,752,163) (4,582,862) (4,756,820)Purchase Of Other Fixed Assets (1,397,500) (917,611) (279,531) (286,519) (293,682) (301,024) (308,550) (316,264) (324,170) (332,275) (375,938) (425,339) (481,233) (544,470) (616,018)Grants 478,916 600,000 635,000Sales Of Properties 480,000 180,000 180,000Sales Of Other Fixed AssetsOther (Purchases) SalesNet Cash From Investment Activities (3,691,666) (6,043,122) (5,265,927) (2,206,115) (2,262,187) (2,728,478) (2,814,271) (2,946,546) (3,043,428) (3,119,979) (3,301,580) (3,738,532) (4,233,395) (5,127,332) (5,372,838)

Net Cash Before Financing (1,167,314) (3,245,814) (1,100,192) 1,309,693 770,099 180,788 323,698 635,526 451,160 529,433 1,485,312 2,537,360 4,058,086 5,192,927 7,207,101

FinancingEquity DrawdownDebt Draw Down 1,500,000 2,000,000Capital Repayments (531,600) (3,635,000) (398,800) (1,130,450) (1,154,350) (1,180,050) (6,191,450) (1,878,850) (1,876,700) (1,653,400) (1,506,550) (1,571,050) (835,600)Working Capital Loan 3,910,728 1,498,992 (179,243) 384,251 999,262 5,867,752 1,243,324 1,425,540 1,123,967 21,238 (966,310) (3,222,486)Net Cash From Financing 968,400 2,275,728 1,100,192 (1,309,693) (770,099) (180,788) (323,698) (635,526) (451,160) (529,433) (1,485,312) (2,537,360) (4,058,086)

BALANCE BROUGHT FORWARD 2,169,000 1,970,086 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 11,356,907 42,050,804INCOME LESS PAYMENTS (198,914) (970,086) 0 0 0 0 0 0 0 0 0 0 0 5,192,927 7,207,101CLOSING BANK POSITION 1,970,086 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 16,549,834 49,257,905

xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final 19. CF 2016-21 v1 MT 29.01.16 27/05/2016

12

Financial Covenants

Connect Business Plan 2016-21 v3 Board 23.03.16Financial Covenants Summary\\connect-file.connecthousing.local\data\ADMIN\BOARD\Board Papers\April 2015 - March 2016\2016 - 03 - 23 March\[xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final.xlsx]15. Financial Covenants Summary

No. Years Year of first 2015.16 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23 2023.24 2024.25 2029.30 2034.35 2039.40Breached Breach Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 15 Year 20 Year 25

in years 1-251. Gearing - THFC

Total Borrowings £000 41,830 44,106 45,206 43,897 43,127 42,946 42,622 41,987 41,535 41,006 35,157 24,666 7,667Total Net Worth = Reserves + SHG £000 101,248 102,835 105,488 106,260 106,660 107,100 107,627 108,368 109,132 110,030 116,505 127,202 145,043

Ratio % 41% 43% 43% 41% 40% 40% 40% 39% 38% 37% 30% 19% 5%Target: less than % 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65%Ok / Fail 0 None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok

2. Gearing - RBS / HBoSTotal Borrowings £000 41,830 44,106 45,206 43,897 43,127 42,946 42,622 41,987 41,535 41,006 35,157 24,666 7,667Total Net Worth = Housing Properties at cost £000 162,013 167,775 173,432 175,352 177,320 179,748 182,253 184,884 187,603 190,391 204,317 220,089 237,950


3. Interest Cover - THFCOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Adjusted Operating Surplus £000 4,918 4,964 5,571 4,977 4,788 4,925 5,036 5,150 5,322 5,430 6,189 7,106 8,225

Interest Payable £000 2,055 2,038 1,946 2,067 2,189 2,280 2,220 2,065 2,191 2,155 1,853 1,329 484Add: Capitalised Interest £000 0 0 0 0 0 0 0 0 0 0 0 0 0Adjusted Interest Payable (B) £000 2,055 2,038 1,946 2,067 2,189 2,280 2,220 2,065 2,191 2,155 1,853 1,329 484

Ratio % 239% 244% 286% 241% 219% 216% 227% 249% 243% 252% 334% 535% 1700%Target: more than % 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110%Ok / Fail 0 None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok

4. Interest Cover - RBS / HBoSOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Adjusted Operating Surplus (A) £000 4,918 4,964 5,571 4,977 4,788 4,925 5,036 5,150 5,322 5,430 6,189 7,106 8,225

Interest Payable £000 2,055 2,038 1,946 2,067 2,189 2,280 2,220 2,065 2,191 2,155 1,853 1,329 484Less: Interest Receivable £000 (12) (11) (5) (5) (15) (25) (25) (25) (25) (25) (25) (25) (25)Net Interest Payable (B) £000 2,043 2,026 1,941 2,062 2,174 2,255 2,195 2,040 2,166 2,130 1,828 1,304 459


5. Interest Cover - Yorkshire BankOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Add: Interest Receivable £000 12 11 5 5 15 25 25 25 25 25 25 25 25Adjusted Operating Surplus (A) £000 4,930 4,975 5,576 4,982 4,803 4,950 5,061 5,175 5,347 5,455 6,214 7,131 8,250



6. 1-Year EBITDA - MRIOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Less: Capitalised Maintenance Works £000 (854) (1,315) (1,794) (1,839) (1,886) (2,342) (2,418) (2,540) (2,626) (2,692) (2,815) (3,184) (3,603)Adjusted Operating Surplus (A) £000 4,064 3,649 3,777 3,138 2,902 2,583 2,618 2,610 2,696 2,738 3,374 3,922 4,622



7. 3-Year EBITDA - MRIOperating Surplus £000 9,867 9,542 8,988 8,103 7,991 8,198 8,432 8,738 10,072 11,299 13,650Add: Depreciation Of Housing Properties £000 5,587 5,971 6,349 6,587 6,758 6,913 7,075 7,163 8,037 9,444 10,237Less: Capitalised Maintenance Works £000 (3,963) (4,948) (5,519) (6,067) (6,646) (7,300) (7,584) (7,858) (8,240) (9,322) (10,547)Adjusted Operating Surplus (A) £000 11,490 10,564 9,817 8,623 8,103 7,811 7,924 8,044 9,870 11,420 13,340

Interest Payable £000 6,039 6,051 6,202 6,536 6,689 6,565 6,476 6,411 5,780 4,355 2,035Add: Capitalised Interest £000 0 0 0 0 0 0 0 0 0 0 0Adjusted Interest Payable (B) £000 6,039 6,051 6,202 6,536 6,689 6,565 6,476 6,411 5,780 4,355 2,035

Ratio % 190% 175% 158% 132% 121% 119% 122% 125% 171% 262% 656%Target: more than % 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110%Ok / Fail 0 None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok

xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final 15. Financial Covenants Summary xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final

13

Financial Covenants (cont)

Connect Business Plan 2016-21 v3 Board 23.03.16Financial Covenants Summary\\connect-file.connecthousing.local\data\ADMIN\BOARD\Board Papers\April 2015 - March 2016\2016 - 03 - 23 March\[xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final.xlsx]15. Financial Covenants Summary

No. Years Year of first 2015.16 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23 2023.24 2024.25 2029.30 2034.35 2039.40Breached Breach Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 15 Year 20 Year 25

in years 1-251. Gearing - THFC

Total Borrowings £000 41,830 44,106 45,206 43,897 43,127 42,946 42,622 41,987 41,535 41,006 35,157 24,666 7,667Total Net Worth = Reserves + SHG £000 101,248 102,835 105,488 106,260 106,660 107,100 107,627 108,368 109,132 110,030 116,505 127,202 145,043


2. Gearing - RBS / HBoSTotal Borrowings £000 41,830 44,106 45,206 43,897 43,127 42,946 42,622 41,987 41,535 41,006 35,157 24,666 7,667Total Net Worth = Housing Properties at cost £000 162,013 167,775 173,432 175,352 177,320 179,748 182,253 184,884 187,603 190,391 204,317 220,089 237,950


3. Interest Cover - THFCOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Adjusted Operating Surplus £000 4,918 4,964 5,571 4,977 4,788 4,925 5,036 5,150 5,322 5,430 6,189 7,106 8,225



4. Interest Cover - RBS / HBoSOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Adjusted Operating Surplus (A) £000 4,918 4,964 5,571 4,977 4,788 4,925 5,036 5,150 5,322 5,430 6,189 7,106 8,225

Interest Payable £000 2,055 2,038 1,946 2,067 2,189 2,280 2,220 2,065 2,191 2,155 1,853 1,329 484Less: Interest Receivable £000 (12) (11) (5) (5) (15) (25) (25) (25) (25) (25) (25) (25) (25)Net Interest Payable (B) £000 2,043 2,026 1,941 2,062 2,174 2,255 2,195 2,040 2,166 2,130 1,828 1,304 459


5. Interest Cover - Yorkshire BankOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Add: Interest Receivable £000 12 11 5 5 15 25 25 25 25 25 25 25 25Adjusted Operating Surplus (A) £000 4,930 4,975 5,576 4,982 4,803 4,950 5,061 5,175 5,347 5,455 6,214 7,131 8,250



6. 1-Year EBITDA - MRIOperating Surplus £000 3,159 3,128 3,580 2,834 2,574 2,695 2,722 2,781 2,929 3,028 3,416 3,903 4,765Add: Depreciation Of Housing Properties £000 1,759 1,836 1,992 2,143 2,214 2,230 2,314 2,369 2,392 2,402 2,772 3,204 3,460Less: Capitalised Maintenance Works £000 (854) (1,315) (1,794) (1,839) (1,886) (2,342) (2,418) (2,540) (2,626) (2,692) (2,815) (3,184) (3,603)Adjusted Operating Surplus (A) £000 4,064 3,649 3,777 3,138 2,902 2,583 2,618 2,610 2,696 2,738 3,374 3,922 4,622



7. 3-Year EBITDA - MRIOperating Surplus £000 9,867 9,542 8,988 8,103 7,991 8,198 8,432 8,738 10,072 11,299 13,650Add: Depreciation Of Housing Properties £000 5,587 5,971 6,349 6,587 6,758 6,913 7,075 7,163 8,037 9,444 10,237Less: Capitalised Maintenance Works £000 (3,963) (4,948) (5,519) (6,067) (6,646) (7,300) (7,584) (7,858) (8,240) (9,322) (10,547)Adjusted Operating Surplus (A) £000 11,490 10,564 9,817 8,623 8,103 7,811 7,924 8,044 9,870 11,420 13,340

Interest Payable £000 6,039 6,051 6,202 6,536 6,689 6,565 6,476 6,411 5,780 4,355 2,035Add: Capitalised Interest £000 0 0 0 0 0 0 0 0 0 0 0Adjusted Interest Payable (B) £000 6,039 6,051 6,202 6,536 6,689 6,565 6,476 6,411 5,780 4,355 2,035

Ratio % 190% 175% 158% 132% 121% 119% 122% 125% 171% 262% 656%Target: more than % 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110%Ok / Fail 0 None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok

xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final 15. Financial Covenants Summary xx - CHA - Audit Trail v3 Board 23.03.16 + Stress Tests Final

2016-21 Business Plan AssumptionsThis paper details the updated assumptions proposed for the 2016-21 Connect Housing Business Plan and for years 3 to 31.

Business Plan Assumptions are regularly reviewed with the last update in Autumn 2015 resulting from the changes from the July 2015 Budget announcement. This update for the 2016-21 Business Plan is the usual one at this time of year that derives from Connect Housing’s annual Budget review.

The main changes in assumptions from those used in the Autumn update of the 2015-20 Connect Housing Business Plan are:

• Minor short term changes to CPI in years 2-4 - see Section 1.• Voids&BadDebtsratesreflecttheBudgetinyear2butlongtermratesareunchanged-see

section 2.• TheimpactofWelfareReformshasbeenincorporatedintobasefigures-seeSection2.• Extra 86 units at Owl Lane, Lindley Moor, Northgate, Hopwood Lane schemes including 19 units as

Shared Ownership – no other major changes made to Development & Disposals – see Sections 3 & 4.

• Small increase in Major Repairs spend with the total 30-year spend per unit up by 2.8% – see Section 5.

• Reduction in LIBOR rates – see Section 6• NomajorchangeshavebeenmadeinOtherfixedassetsandDepreciationassumptions–see

Sections 7 & 8.• Cost Savings – some have been incorporated into the 2016.17 Budget but further savings are

included from 2017.18 as follows (at 2016.17 prices) with a note in brackets of how these have changed from the Autumn 2015 Plan:

• Routine Maintenance - £360k in 2017.18, £385k in 2018.19 and £400k for all years thereafter (allyearsare£140kdown);

• MajorRepairs-£1.4muntil2019.20(+£300k)andafurther£125kpafrom2025.26;• Staffing-£30kpain2017.18&forallyearsthereafter(downfrom£182kpa);• Overheads-£50kin2018.19andforallyearsthereafter(downfrom£218kpa);and• Staffingtobeconfirmed-£50kin2019.20andforallyearsthereafter(downfrom£100kpa).

14

15

1.0%1.5%2.0%

Actual -11.0%1.0%1.0%

Nil

1.0%1.0%1.0%

see note

Nil1.0%

see note

1.67%1.95%

2.47%5.30%

Nil

1.29%

1.88%1.83%1.61%1.40%

Nil

ave 4.3%

23

4-31

2-56-312-312-31

2-312-312-31

2-5

2-312-312-5

23-1

23-31

2-31

2

34-56

7-31

2-31

2-31

Assumptions

CPI then ‘Real’ increases between the years:CPI – used as the base for all increases (years 2&3 have changed from the Autumn 2015 Plan of Nil & 1.5% respectively but the long term rate is unchanged)

Rent (real rate above CPI)- General Needs, Supported & HOP

- Shared Ownership- Managed Units, Student & Commercial

Other Real Rates (no change from the Autumn 2015 Plan)

Management costsEarningsRoutine and cyclical maintenance costs & Major Repairs costsDevelopmentcosts–allcashflowsenteredatcurrentyearpricesSupporting People GrantOther income and expenditureProperty values – unit sales values kept at current year prices

Voids, Bad Debts & Arrears – changes due to Welfare Reforms are included in the base levelsVoids (long term no change from the Autumn 2015 Plan)- General needs, Sheltered

- Supported Housing

- Shared Ownership, Managed Units

Bad debts (long term no change from the Autumn 2015 Plan)- General needs, Sheltered, Supported Housing

- Shared Ownership, Managed Units

Arrears level - net of bad debt provision & as a percentage of gross rents receivable(small increase from ave 4.1% in the Autumn 2015 Plan)

Welfare Reforms – there are no extra costs in future years (no change from the Autumn 2015 Plan).

Years Connect

1a

b

cde

f

ghi

2

a

b

c

d

16

Developments – completing current schemes & committed schemesCapital spendSHG receivableNew units – GN 110, SH 16, SO 19First Trance Sales Proceeds – Owl Lane 9 units, Lindley Moor 3 units, Northgate 5 unitsCapitalisation of Development Team salaries

DisposalsGeneral needs & Supported housing disposals – Sales proceeds of £0.84m & £12.2k surplus pu

Shared ownership staircasing sales

Major RepairsTotal spend including Fees, Contingency & VAT but excludingInflation(upby2.8%from£58.5m)Total spend per unit (up by 2.8% from £18,973)Capitalisation rates – takes account of Component Accounting

Funding (all years are down from the Autumn 2015 Plan & long term down from 2014-19 at 6.5%)LIBOR - excluding margin (Autumn 2015 LIBOR assumptions shown in brackets)

Margin on future Long Term Variable debt (Total interest rate = LIBOR + margin)- BoS £10m Facility- RBS £40m Facility

Fixed rate funding – current proportion of all fundingFixed interest rates – rangeInvestment rate on surplus funds)

Minimum cash balance

6-316-316-31

1-31-41-43-4

2-5

1-34-31

2-31

2-312-312-31

2345

6-31

2-67-31

11-311-45

6-31

2-31

NilNilNil

£11.64m£2.06m

145£1.32m

63%

14Nil

Nil

£60.1m£19,504Ave 95%

1.0% (3.0%)1.5% (4.0%)2.5% (5.0%)3.5% (5.0%)4.5% (5.0%)

1.35%1.5%

73%1.8%-11.5%

0.5%1.5%2.5%

£1m

Voids & Bad debts ArrearsStaff, Overheads & Void Repair costs

Year 32017/18

NilNilNil

Year 42018/19

NilNilNil

Year 52019/20

NilNilNil

Assumptions Years Connect

3

abcdef

4a

b

5a

b

6

a

b

cde

f

23-311-21-31

1-31

1-311-311-311-31

Other Fixed Assets (no major change from the Autumn 2015 Plan)Spend–inrealtermsexclinflation-IT&Fixtures&fittings

Offices(Dewsbury£1.4m&RoundhayRoad£0.15m)Disposals

Depreciation (no change from the Autumn 2015 Plan)Housingproperties-broughtforwardassets(reflectingComponent Accounting)- new development & capitalised major repairsOfficesFixtures and FittingsComputer equipment

7

a

b

8a

bcd

£458k£270k pa£1.55m

Nil

1.4%

4.0%1.67%15.00%33.33%

Assumptions Years Connect

17

Connect Business Plan 2016-21 - Board 23.03.16 CUMULATIVE STRESS TESTING & DEVELOPMENT CAPACITY

FOR THE PERIOD ENDED 31 MARCH 38

POSSIBLE MITIGATION STRATEGY – Reduce Costs by £100k pa for all years from 2017.18

POSSIBLE MITIGATION STRATEGY – Reduce Costs by £1.5m pa for all years from 2017.18

3 YEAR EBIDA-MRI SURPLUS DEBT

Appendix B

18




19




20


POSSIBLE MITIGATION STRATEGY – Reduce Costs by £2.2m pa for all years from 2016/17


21

Summary of Possible Mitigations - Cost Reductions pa from a specific year

Stress 2015.16 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23 2023.24 2024.25Test Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Cumulative £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

1 CPI 100 100 100 100 100 100 100 1002 Rents 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400

Subtotal 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,5003 Voids & BD 125 125 125 125 125 125 125 125

Subtotal 1,625 1,625 1,625 1,625 1,625 1,625 1,625 1,6254 Interest 50 50 50 50 50 50 50 50

Subtotal 1,675 1,675 1,675 1,675 1,675 1,675 1,675 1,6755 Mangt Costs 50 50 50 50 50 50 50 50

Subtotal 1,725 1,725 1,725 1,725 1,725 1,725 1,725 1,7256 Maint Costs 50 50 50 50 50 50 50 50

Subtotal 1,775 1,775 1,775 1,775 1,775 1,775 1,775 1,7757 New Units 150 150 150 150 150 150 150 150

Subtotal 1,925 1,925 1,925 1,925 1,925 1,925 1,925 1,9258 RTB 275 275 275 275 275 275 275 275

= Worst Case 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200

22

23

1. Financial health 1.1 The impacts of Welfare Reform mean that Connect is unable togeneratesufficientincome frompropertylettingtosustaincoreactivities,whilstatthesametimecontinuingtofulfil Connect’s social objectives1.2 Treasury,LoanCovenantandCashflowmanagementisinsufficientlyrobusttomeetbusiness, lender and regulator requirements1.3 Business objectivetoredirectresourcesthroughefficiencysavingstoinvestmentinhighquality front line services, improving the stock and delivering new developments fails to achieve expected results1.4 Fraudulent activityresultsinsignificantfinancial(andreputational)losstoConnect1.5 Pension liabilities continue to escalate outside Connect’s control, to a level that is no longer sustainable1.6 Impact of Right to Buy results in net loss of assets and revenue to the extent that Connect can no longer continue to provide a quality affordable service

2. Service delivery & customer satisfaction2.1 Failing to match products and services to customer expectations and requirements, causing high turnover / low demand2.2 Digitalservicesstrategyfailstodelivertheservicechoiceandefficienciesthatenableresources to be focussed on those customers in greatest need2.3 Anti-Social Behaviour on estates escalates to cause high turnover/low demand, with associated higher costs and reputational damage2.4 Loss of contract income, particularly in Supported Housing, reducing capacity to provide tenancy support, and adding pressure on overheads costs2.5 Insufficientresourceandskillstobuildandsustainawellused,vibrant,VFMcommunitybasein Dewsbury

3. Regulation & legislation3.1 Regulatory Judgements slip from V1G1, causing increased risk of Regulatory scrutiny (having particular regard to the delivery of accurate and timely data submissions)3.2 Impact of H&S failure (safeguarding / Lone working / Gas / Fire / Electric / Asbestos / Legionella) in terms of personal injury, regulatory status, reputational damage, cost and diversion from core business3.3 Accountancy practices do not meet the requirements of external audit, to meet lender and regulator requirements3.4 Impact of data protection breach in terms regulatory status, reputational damage, cost and diversion from core business

4. Asset management - DR

4.1 Inadequate internalandexternalresourcesareavailablewithsufficientcapacityandat acceptable cost to maintain the Association’s stock to an acceptable level that will sustain demand in line with Connect’s strategic objectives.4.2 Failingtoidentifyanddealwithstockthatrepresentssignificantchallengesinthefuture operating environment, resulting in a diversion of resources.4.3 Notbeingabletodevelopnewhomesofsufficientquantity,qualityofthetypeandinthe places where we need them to replace stock lost through Right to Buy (with particular reference to Affordable Housing and the prospect of non-grant funded development).

Key Strategic Risks

24

5. Reputation5.1 Impact of breaching government requirements on regulatory status and reputation5.2 OrganisationbehavioursfailtoreflectConnect’svalues,particularlyinrelationto promoting and delivering equality and inclusion5.3 Key partnerships and stakeholder relationships managed ineffectively causing loss of trust and future business opportunities5.4 Crisis management fails to secure effective business continuity

6. Business management6.1 Leadership at all levels within the organisation fails to deliver the culture required to survive and thrive within the current operating context6.2 Strategic planning inadequate to prepare Connect effectively for the challenges ahead6.3 Failure to deliver continuous improvement in performance6.4 Governanceandscrutinyframeworksareinsufficientlyrobusttosupportbusinessoperations effectively6.5 Management and customer insight information is not used effectively to drive service and product development, and performance improvement6.6 Inadequate impact and risk assessment relating to new activities, resulting in unacceptable diversion of resource from core activities

25

Risk Management Strategy

1. Purpose of Strategy

The purpose of this document is to outline an overall approach to risk management that addresses the risks faced by Connect Housing in the achievement of its stated aims, and which will facilitate the effective recognition and management of such risks.

2. Definition of Risk

Riskisdefinedassomethinghappeningthatmayhaveanimpactontheachievementofourobjectives. It includes risk as an opportunity as well as a threat.

3. The Association’s “Risk Appetite”

The Association’s Risk Management Strategy is not one of risk avoidance, rather it aims to identify and manage an acceptable level of risk. The Board of Management will review and approve annually the level of risk it is willing to retain in each strategic area i.e. the approved “Risk Appetite”. Where thelevelofriskidentifiedisconsideredtobeoutsidetheapprovedRiskAppetite,thentheBoardwillconsider as a matter of urgency what further steps are required to mitigate this level of risk.

4. How Risks Are Identified

RisksareidentifiedbyreferencetotheAssociation’sstatedobjectives,andwillnormallyusethecurrent or proposed Business Plan as a basis for this exercise. On an annual basis the Association’s Board of Management and Audit & Risk Management Committee will consider and approve the Key Strategic Risks that threaten or impact on the Association’s ‘vision’ objectives.

5. Risk Mapping and Identification of Risk

The Association will undertake an annual Risk Mapping exercise based on the current or future BusinessPlanandanystrategicrisksidentifiedatTeam/Directoratelevel.ReferencewillalsobemadetotheHCA’sSectorRiskProfileannualupdate.Allstaffhavearesponsibilitytoassistintheidentificationandmanagementofrisk.

IdentifiedKeyStrategicRiskswillbeallocatedtoamemberoftheManagementTeam(orcollectivelyif appropriate) and will also be used to inform the Consolidated (and Directorate) Risk Map. Risks determinedasnon-DirectoratespecificwillbeallocatedtotheCorporateRiskMapandmanagedbythe Chief Executive.

6. Prioritising Risk

Risks will be prioritised in terms of likelihood of occurrence and expected impact on the Association. Key Strategic Risks will be scored with regards frequency/impact/colour coding and will be subject to a moderation review by Management Team prior to review by the Audit & Risk Management Committee and the Board of Management. See below for guidance on scoring probability, impact and suggested action.

7. Identification of Controls

ControlstomanageidentifiedriskswillbeagreedbyrelevantmanagersandincludedintheConsolidated Risk Map.

8. Monitoring Risk

Risk management should be embedded within the daily operation of the Association, and will be monitored on a regular basis (monthly) at Management Team level, in addition to Quarterly Progress updates, and at least quarterly at Directorate and/or team/review meetings.

A Risk Register will record all material risks/incidents that have crystallised, including any action taken and lessons learned.

9. Reporting Requirements

Executive summaries should be produced for all Directorate/Corporate Risk Maps which summarise significantchangestotheriskprofilesincethepreviousreports,includingnewrisks,archivedrisksandmovementsinriskassessments,toaidunderstandingofthechangesinriskprofile.

ThefinalConsolidatedRiskMapwillbeapprovedannuallybytheAuditCommittee,andmonitored/updated by Management Team as required in the intervening period. Material changes to the Consolidated Risk Map will be brought to the attention of the Audit & Risk Management Committee and/or Board of Management as deemed necessary.

TheAudit&RiskManagementCommitteewillconfirmtotheBoardofManagementtheirannualreview of the Consolidated Risk Map and Key Strategic Risks, detailing any risks, which are ranked high likelihood and/or impact.

The Board of Management will review the annual Risk Management report from the Audit & Risk Management Committee and approve the level of risk that it is willing to retain in each strategic area.

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RISK MAP DEFINITIONS / (Scores)

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LIKELIHOOD

High (3)

Medium (2)

Low (1)

IMPACT

High (3)

Medium (2)

Low (1)

‘Everyday’ event/almost certain to happen

Faily common event/even chance of happening

Not a common event/slight chance of happening

‘Oh no!’Would threaten business objectives/impact on annual surplus £100k+

‘Oh dear’Could threaten business objectives/impact on annual surplus £25k - £100k

‘Oh well’Would not threaten business objective/impact on annual surprlus less than £25k

1

2

3

2

3

3

Acceptable level of risk – annual review of controls

Acceptable level of risk – annual review of controls

Acceptable level of risk – quarterly review of controls

Unacceptable level of risk – monthly monitoring of controls

Unacceptable level of risk – constant monitoring, further control measures needed

Unacceptable level of risk – immediate action required

low probability/low impact

medium probability/low impact

high probability/low impact

medium probability/medium impact

high probability/medium impact

high probability/high impact

1

1

1

2

2

3

Scoring KeyProbability Impact

1

2

3

4

6

9

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Contact usIf you would like more information about any aspect of the Business Plan, please contact any of the Management Team and we will be happy to discuss this with you.

Jenny BrierleyChief Executive

[email protected]

Martyn BroadestDirector of Regeneration

[email protected]

Helen LennonDirector of Neighbourhoods and Communications

[email protected]

Sean FlynnDirector of Finance & Resources

[email protected]

Christine FoxDirector of Social Investment

[email protected]

Connect Housing Association Limited is a charitable housing organisation registered under the Co-operative andCommunityBenefitSocietiesAct2014(No.IP17445R)andwiththeHousingandCommunitiesAgency(No.L2285).RegisteredOffice:205RoundhayRoad,Leeds,LS84HS.

NEW DEWSBURY OFFICE

21 Bond StreetDewsbury

WF13 1AX

WE CAN COME TO YOU

Whilst we are refurbishing our Dewsburyoffice,ifyouwouldlike to meet with a member of our team face-to-face, we can arrange a home visit. We also have access to meeting spaces within Huddersfieldandcanbookanappointment to suit you. Just call us on 0300 5000 600.

LEEDS OFFICE

205 Roundhay Road

Leeds

LS8 4HS

Monday, Tuesday, Thursday: 9am – 5.30pm

Wednesday:

10.30am – 5.30pm

Friday:

9am – 5pm

Getting in touch

/ConnectHousing

@ConnectHousing

www.connecthousing.org.uk

0300 5000 600

[email protected]

2016FULLY OPENS U M M E R

Our passion is for a fairer society, where people’s homes, health and happiness matter.

Documents

TAKING A STAND Business Plan 2016-19 - Connect Housing · Business Plan 2016-19 ... with current market forecasts supplied by ... 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 2022.23