“May you live in interesting times”

Residents Forum

24th November 2015Item: 6

Rita Akushie Deputy CE/Group Finance Director

3 Key Issues

− Right to Buy

− Welfare Reforms/Budget

− Big Picture

RTB (1)

Replace

Brownfield Fund

Treasury

Fund HA Discounts

Council Sells

RTB (2)

Proceeds to HA (less discounts)

Discount paid to HA

HA builds replacement

Resident Buys

RTB (3)

• Council sales income?• London issue• Independence of HAs• Section 106s, Rural Schemes,

Supported, etc.

What will RTB mean for Newlon?

2016 2017 2018 2019 2020 2021 2022 2023100%

150%

200%

250%

300%

350%

Bank Interest Cover

TargetBase Case40 RTB p.a

2016 2017 2018 2019 2020 2021 2022 2023100%

120%

140%

160%

180%

Cash Interest Cover

TargetBase Case40 RTB p.a

RTB (4): Newlon Operational Issues• Time to replace• Replacement areas• Fraud prevention• Administration (valuations)

RTB (5): Newlon Operational Issues• Charges to Lenders• Buy to Let Landlords• What and where should be excluded?• What else?

Budget 2015

Budget 2015

• Pay to stay• No HB for 18 – 21 year olds• Welfare cap (£23k London)• End lifetime tenancies• Rip up HA rent settlement

2016 2017 2018 2019

-6

-4

-2

0

2

4

6

8

10

12

14

Planned cpi +1% Now -1%

Year

%

Rent Increases and Decreases

YEAR Business Plan Now

2016 +1.5% -1.0%

2017 +2.2% -1.0%

2018 +2.2% -1.0%

2019 +2.4% -1.0%

And in Newlon’s business plan

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/230

10

20

30

40

50

60

70

Rent Reduction – Income Projection

Before After Column1

£Mil

lio

ns

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/230

10

20

30

40

50

60

70

Rent Reduction – Income Projection

Before After

£Mil

lio

ns

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/230

1

2

3

4

5

6

7

8

9

Rent Reduction Difference

Difference

£Mil

lio

ns

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/230

5

10

15

20

25Rent Reduction – Surplus Projection

Before After

£Mil

lio

ns

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/230

1

2

3

4

5

6

7

8

9

10Rent Reduction - Difference

Difference

£Mil

lio

ns

2016 2017 2018 2019 2020 2021 2022 202370%

80%

90%

100%

110%

120%

130%

140%

150%

Cash Interest Cover

Target Base Case Reduced Rents

Way forward

• Total savings of £13.1m required• Includes £8.3m in services/overheads• Plus £4.8m savings in Stock Investment• In discussion with Regulator, Lenders

and Rating agency

• Any other questions?

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/230

5

10

15

20

25

30

35

40

Operational Cost

Operational Cost

£Mil

lio

ns

Response to Changes – Growth/Capital• Size of development programme• Shape (tenure) of development

programme• Decent homes• Life Cycles

Strategy (1)

• Group structure• M & A• Diversification• Shared Services• De-register• Use non-RP part of Group

Strategy (2)

• Sell poor performing assets• Rationalise• Interest cost + certainty• Any other ideas?

A careful plan?