Libra (Longhurst Group) Treasury plc

Libra (Longhurst Group) Treasury plc Investor Presentation July 2014 Rob Griffiths Chief Financial Officer Longhurst Group Bob Walder Chief Executive Longhurst Group www.longhurst-group.org.uk 1 1

Agenda Group Overview and Structure Governance and Regulation Development Programme Financials and Treasury 2 2

Group Overview and Structure 3 3

Overview of Longhurst Group Longhurst Group is a combination of 3 subsidiary housing associations, providing a range of different tenure types including general needs, supported and sheltered housing, shared ownership, care homes, and leasehold schemes for the elderly. The group is led by Longhurst Group and also includes 2 non-registered subsidiaries, one focussing on development for sale and the other a special purpose funding vehicle. Longhurst Group Ltd is the parent company, providing strategic direction and back office services to the whole group Longhurst & Havelok Homes Ltd was formed in October 2009 from the amalgamation of 2 former subsidiaries which owns and manage around 8,500 homes Spire Homes (LG) Ltd was formed as a result stock transfers from East Northamptonshire District Council in February 2001, and from Rutland County Council in November 2009 which owns just over 5,000 homes Friendship Care and Housing Ltd joined the group in May 2006 and owns and manages 4,622 homes across Birmingham, Derby and Charnwood Keystone Developments (LG) Ltd is the development arm of Longhurst group, focusing on building for sale, primarily for those in retirement Libra (Longhurst Group) Treasury plc was established in May 2012 as a special purpose funding vehicle to facilitate the capital market issue and bank loan restructuring. Libra manages the treasury arrangements and associated security for the bond and new loan facilities on behalf of two of our member companies, L&H Homes and Spire Homes Headlines - Diversified across 40 Local Authorities - 18214 owned and managed homes - 3 HCA registered housing subsidiaries - a mixture of Large Scale Voluntary Transfer (LSVT) and traditional 4 4

Introduction Leading housing group operating across 12 counties and 40 local authorities in the Midlands and the East of England, over 18,200 owned or managed homes Group structure allows Longhurst to deliver effective local services while still benefiting from economies of scale Improving financial results operating margin at 30.1% up from 19.5% in 2011/12 Strong cashflow generation with no reliance on asset sales Experience in managing corporate growth with five major transfers and amalgamations in the past 13 years Low debt per unit compared to peers Financially secure excellent track record with our existing funders and regulator 5 5

Longhurst Group Objectives To be a leading provider of excellent housing, care and support services, making a positive impact in local communities Provide at least 2,500 new homes in the next 5 years Protect and maximise our revenue streams Continue to deliver excellent customer focused services Be innovative in developing new or enhanced services and delivering value for money Invest in our people at all levels To manage the risks we face proactively and systematically without becoming complacent or risk averse Actively seek new acquisitions, amalgamations or partnerships 6 6

Locations of Longhurst Group s Housing Stock 7 7

Governance and Regulation 8 8

Governance Strong and skilled boards Anne Adamthwaite appointed Chair Designate in June 2014 to take over as Group Chair at September AGM. Anne joined the Board in December 2012 and is a Senior Solicitor at Anthony Collins solicitors. Anne s legal background is on governance and local authority transfers within the Housing Association sector Clear parental control powers to appoint or remove all or any Board Directors Common policies and codes of conduct We share the same values the foundation to our cultural and organisational development Group Executive Team has overall operational control of the group LONGHURST GROUP BOARD GROUP AUDIT COMMITTEE CHAIRS COMMITTEE L&H BOARD SPIRE BOARD FRIENDSHIP BOARD KEYSTONE BOARD LIBRA BOARD 9 9

Regulatory Judgement & Risk Management In February 2014 the group was given a G1/V1 rating by the HCA Longhurst Group meets the requirements set out in the Governance and Financial Viability Standard and has the capacity to mitigate its exposures effectively The HCA were satisfied that the key risks previously identified in 2013 had been fully addressed. Risk Management & Contingency planning Longhurst are the first registered provider to put in place a Comprehensive Contingency Plan to further enhance existing Business continuity plans which have been in place for some time. The Contingency Plan was approved by the Group Board in December 2013. The Contingency Plan incorporates additional stress testing of the business plan and models the impact of a number of extreme scenarios. The plan considers what the Boards response should be in those scenarios to protect the business and the social housing assets. The Contingency Plan was independently verified by Savills 10 10

Development Programme 11 11

No of Units Development Programme Longhurst s development work is focused on high value, low risk developments Over 70% of our programme is forecast to be achieved via Section 106 Agreements The current business plan assumes an average of 500 properties per annum being completed between 2014/15 and 2019/20 Committed and pipeline schemes are in place to deliver 1400 properties over the next 3 years within business plan parameters Business plan assumes no social housing grant beyond that which has already been awarded The majority of new rented properties are to be let at affordable or intermediate rents 700 Development Programme as at 30.06.2014 600 500 400 300 200 100 0 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Completed 436 Committed and Pipeline 0 601 399 356 117 236 0 BP 642 371 152 600 299 321 Development Programme - 1,709 Committed and Pipeline properties compared to BP 2,385 12 12

Recently completed Windsor Avenue, Peterborough Princess Marina, Rushden Gidding Road, Sawtry Midland Road, Peterborough 13 13

Financials and Treasury 14 14

Historic Consolidated Income & Expenditure Income & Expenditure Account Restated 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 '000's '000's '000's '000's '000's '000's Turnover 67,074 70,725 82,614 82,527 86,869 97,546 Cost of Sales (4,329) (3,038) (11,687) (3,226) (4,960) (7,297) Operating Costs (52,061) (57,778) (60,794) (63,262) (59,277) (60,693) Operating Surplus 10,684 9,909 10,133 16,039 22,632 29,556 Operating Margin 15.9% 14.0% 12.3% 19.4% 26.1% 30.3% Net Interest (11,647) (12,143) (13,849) (15,701) (20,577) (23,301) Surplus on Sale of Assets 1,274 1,025 7,131 3,362 966 1,471 Surplus/(Deficit) on Ordinary Activities 311 (1,209) 3,415 3,700 3,021 7,726 Exceptional Item - Loan Restructuring (2,323) 0 Tax 41 (53) (82) (59) (12) (10) Net Surplus/(Deficit) 352 (1,262) 3,333 3,641 686 7,716 15 15

Revenue Breakdown 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Revenue Breakdown 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Non Social Housing Activities 2,453 2,792 2,543 1,967 3,601 3,753 Other Social Housing Activities 12,103 9,092 10,177 11,177 10,504 14,774 Social Housing Lettings 52,518 58,463 61,030 69,358 72,764 79,019 Growing revenues from social housing business Income from other social housing activities provides some diversification with minimal risks. Turnover on social housing lettings increased by 8.6% in 13/14. Increase was due to new properties coming into management, inflationary increase and effect of 53 rd rent week. The increase in non-social housing revenue in 12/13 and 13/14 was due to an increase in open market sales. % of Total Revenue 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 General Needs Social Housing Lettings 78% 83% 83% 84% 84% 81% Other Social Housing Lettings & Activities 18% 13% 14% 14% 12% 15% Non Social Housing Activities 4% 4% 3% 2% 4% 4% 100% 100% 100% 100% 100% 100% 16 16

Improving Operating Surplus 30,000 27,000 24,000 21,000 18,000 15,000 12,000 9,000 6,000 3,000 0 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Operating Surplus 10,684 9,881 10,101 16,014 22,632 29,556 Operating Margin 15.93% 14.01% 12.27% 19.43% 26.05% 30.30% Improving operating surplus in 12/13 and 13/14 with operating margin at just over 30% in 13/14, up from 19.4% in 11/12 Improvement in operating surplus and margin in last 2 years due to: Executive Team focus on reducing management costs across the business Bringing new homes into management without adding to the cost base. New repairs contracts reducing day to day maintenance costs Completion of stock transfer investment programme reducing maintenance costs further Operating costs likely to reduce further through further efficiency savings and new units coming into management on a marginal cost basis 17 17

Group Key Financial Metrics Cash Flow Statement 2009/10 2010/11 2011/12 2012/13 2013/14 '000's '000's '000's '000's '000's Operating Cashflow 17,307 19,909 24,656 34,072 39,065 Proceeds from Asset Sales 4,125 10,931 7,835 6,118 3,755 Cash Interest Paid (12,993) (13,641) (15,157) (20,946) (24,102) Cash Interest Cover (excl. Asset Sales) 1.3 1.5 1.6 1.6 1.6 Cash Interest Cover (incl. Asset Sales) 1.6 2.3 2.1 1.9 1.8 Interest Cover - Bond covenant (130%) 134% 182% 186% 165% 174% Cashflow Interest Coverage (excl. and incl. asset sales) Leverage Cashflow Interest coverage (excl. and incl. asset sales) 70% Debt/Capital 2.5 2.0 1.5 1.0 0.5 0.0 Cash Interest Cover (excl. Asset Sales) Cash Interest Cover (incl. Asset Sales) 2009/10 2010/11 2011/12 2012/13 2013/14 1.3 1.5 1.6 1.6 1.6 1.6 2.3 2.1 1.9 1.8 60% 50% 40% 30% 20% 10% 0% 59% 46% 47% 51% 56% 2009/10 2010/11 2011/12 2012/13 2013/14 18 18

000's No of Units High Quality Asset Base 2009/10 2010/11 2011/12 2012/13 2013/14 General Needs Housing 11,138 11,278 12,706 12,997 13,215 Supported and Sheltered Housing 2,034 2,063 2,030 1,990 1,987 Shared Ownership 962 978 1,011 1,282 1,388 Care Homes 231 227 230 177 177 Leasehold Schemes for the Elderly 993 977 974 1,038 1,040 Total Social Housing Units 15,358 15,523 16,951 17,484 17,807 Market Rented Properties 12 12 13 12 12 Student Accommodation 41 41 18 7 7 Total Units 15,411 15,576 16,982 17,503 17,826 Units managed for others 755 690 722 474 388 Total owned and managed 16,166 16,266 17,704 17,977 18,214 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Housing Properties (Depreciated Cost) 0 2009/10 2010/11 2011/12 2012/13 2013/14 535,093 562,868 620,345 666,381 709,034 Total owned Properties 15,411 15,576 16,982 17,503 17,826 18,500 18,000 17,500 17,000 16,500 16,000 15,500 15,000 14,500 14,000 19 19

Bond Security Valuation Date: June 2014 Business Stream Units EUV-SH MV-T Total MV-VP L & H General Needs & Sheltered 607 2,410,000 31,420,000 33,830,000 59,950,000 L & H Rent to Homebuy 12-1,120,000 1,120,000 1,565,000 L & H Shared Ownership 22 1,030,000 1,030,000 2,040,000 Spire General Needs & Sheltered 4,607 226,680,000 11,540,000 238,220,000 535,000,000 Spire Rent to HomeBuy 4-200,000 200,000 325,000 Spire Shared Ownership 100 5,560,000 5,560,000 9,960,000 Spire Supported - Unrestricted 7 160,000 110,000 270,000 630,000 5,359 235,840,000 44,390,000 280,230,000 609,470,000 Asset Cover 1.05 1.15 Net of Asset Cover 224,609,524 38,600,000 Total Debt covered by Asset Cover Requirement 263,209,524 Security Required 250,000,000 Security headroom 13,209,524 Properties by type Bungalow Flat House % 21.76% 28.36% 49.88% No 1166 1520 2673 20 20

Treasury Policy Group Treasury Management Objectives: Hedging Activity To continue programme of security charging in advance of funds being required To further improve the Group s operating cash position Treasury Policy updated to reflect changes required for FRS 102 78% - Embedded 22% - ISDA Bank V Capital Market Debt Debt Repayment Profile 500,000 400,000 300,000 48% - Bank 47% - Bond 5% - Other 200,000 100,000 Total committed funding 480m 0 Within one year Within one to two years Within three to five years Between five and ten years Between ten and twenty years Greater than twenty years Undrawn 9,000 0 48,500 4,250 8,500 2,750 73,000 Drawn 3,380 345 66,862 34,771 53,842 247,474 406,674 12,380 345 115,362 39,021 62,342 250,224 479,674 Total 407m Drawn 73m Undrawn 21 21

000's 000's Hedging Profile Longhurst Group - Hedging Position Total Debt 2014+ 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Fixed Rate Debt Floating Rate Debt Due to the Group funding restructuring and Bond Issue in 2012-13 the Group s hedging activity is currently in excess of the defined maximum of 90% and this exception has been approved by the Libra Board. It is anticipated the ratio of Fixed to Variable debt will return to the usual parameters during 2014/15. Year Longhurst Group - Hedging Position Total Debt inc Stand Alone Derivatives 2014+ 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Fixed Rate Debt Total inc Swaps Variable Rate Debt Year 22 22

Appendices 23 23

Chairs David Armes, Group Chairman Following his retirement, David wanted to put his experience to good use, and with his belief in the crucial role that housing plays within a community, chose to become a board member for a housing association, joining the Board of Longhurst Housing Association in 2000 and becoming Chair in 2001. He already knew the fundamentals of the sector having worked with Longhurst whilst at East Midlands Electricity. David is also holds a number of other roles and is currently a Governor of Kings Grammar School Grantham and sits on the Advisory Council of the University of Evansville in Indiana, (which has a campus based in Harlaxton, near Grantham). Anne Adamthwaite, Group Chair Designate Anne is a Senior Associate with Anthony Collins Solicitors and has more than 25 years experience working as a qualified solicitor. Anne has significant experience of the housing sector having undertaken work for local authorities and housing associations. Anne s experience of the housing sector covers a number of different areas, including governance, funding and stock transfers. Anne joined the Group Board in December 2012 and was elected Group Chair Designate in June 2014. Anne will take over as Group Chair after the AGM in September 2014. Rob Lankey, Chair of the Libra Board Rob is Managing Director of Commercial Mortgages for Aldermore Bank plc and has responsibility for the direction of operational, sales and credit risk strategies of a substantial business line within the Bank. Rob joined the Board of Spire Homes in the year 2000 when it was East Northamptonshire Housing and was part of the original board ahead of the stock transfer. Rob was also on the Audit Committee of Longhurst Group for 11 years as Deputy Chair of the Committee until he rescinded this position to become the current Chair of the Libra Board (May 2012) and prior to that the Finance and Treasury Committee of Longhurst Group in May 2011. 24 24

Executive Team Bob Walder BSc, FCIH, Group Chief Executive Bob is the Group Chief Executive and has worked for Longhurst since 1989. He has dedicated his career to housing, beginning in 1977 when he joined the Moss Care Housing Association as a housing support and advice worker. Having graduated from Bristol University, he qualified by examination for Membership of the Chartered Institute of Housing in 1978 and has been a Fellow since 1990. Bob plays a significant role in the housing sector outside of his work for Longhurst Group. He was twice Chairman of the National Housing Federation (NHF) in the East Midlands and he was re-elected onto the regional executive committee in February 2012 for a three-year term. Bob was also Chairman of the East Midlands Regional Housing Board and a member of the Regional Assembly. Bob remains committed to the provision of decent housing for all who need it and is a keen supporter of Homeless International. Rob Griffiths FCCA, Chief Financial Officer As Chief Financial Officer of Longhurst Group since 2006, Rob enjoys a varied role; leading the entire financial services function across the Group and advising the Board and Senior Team on financial matters covering a range of issues such as treasury management, growth opportunities and overall performance. Rob joined Longhurst in 1994 and has worked in a number of roles within the Finance Team which has provided him a detailed understanding of the Group. He is currently the chair of the East Midlands Finance Forum and is a member of the National Housing Federations Finance & Policy Advisory Group. Rob also represents the NHF on the Statement of Recommended Practice (SORP) working party, and has been appointed as an observer to the Financial Reporting Councils Committee on Accounting for Public Benefit Entities Julie Doyle DMS, MBA, MCIM, Managing Director Spire Homes and Deputy CEO, Longhurst Group Julie Doyle is Managing Director of Spire Homes Ltd, based in Rushden, Northamptonshire. She is also Deputy Chief Executive of Longhurst Group and works with the Chief Executive on the Business Development Strategy. After developing her career in housing, Julie joined Longhurst Group in April 1995 to help set up and lead a Contract Services Department. Julie has recently taken Spire Homes to Charitable Status, which will allow Spire Homes to operate for the benefit of local communities and ensure that it helps those in most need. She is a member of the East Midland National Housing Federation (NHF) Executive Committee and also acts as 'Chair' of the NHFs East Midlands Group. Julie obtained her MBA (with distinction) in 1997. 25 25

Executive Team Mike Hardy BA (Hons), MBA, FCIH, Managing Director Longhurst & Havelok Homes Mike is the Managing Director of Longhurst & Havelok Homes (L&H Homes) as well as a member of the Longhurst Group Executive Team. He began working in the housing sector after his graduation from Sheffield University in 1980. Having obtained the Professional Qualification of the Chartered Institute of Housing in 1984 he became an elected member of the CIH in the same year, and he has also been a fellow of the CIH for many years. He went on to gain further academic recognition by obtaining his MBA with a distinction from the University of Nottingham Business School in 1999. Mike took up the position of Housing Manager at Longhurst in 1986. In 2009, he led the amalgamation of Longhurst Homes and Havelok Homes into the company he now leads, L&H Homes. Jonathan Driffill BA (Hons), MSc, MRTPI, MCIH, MIoD, Managing Director Friendship Care and Housing Jonathan joined Friendship Care and Housing in 1996 from Walsall City Challenge, with previous experience in economic development and urban regeneration with various local authorities. He was appointed managing director of Friendship in March 2004. Jonathan was previously director of housing and neighbourhoods. He currently chairs BVSC, (Birmingham Voluntary Service Council) one of the largest voluntary sector support organisations in the UK. Jonathan is also on the BSHP (Birmingham Social Housing Partnership) Executive team and Chair of the Derby Social Housing Forum. Peter Osborne, Managing Director of Central Services Longhurst Group Peter is the Managing Director of Central Services for Longhurst Group. His first role in the housing sector came in August 2002 when he took on the role of Managing Director at Havelok Housing Association (now L&H Homes) just before the company joined Longhurst Group in 2003. His move to the housing world came after a career spanning 25 years at Marks and Spencer, which saw him take on a number of roles including that of store manager. Since October 2009, Peter has been the Managing Director of Central Services. 26 26