Financial impacts of COVID-19 on AHBs

Webinar: 30th June 2020, 3pm

Miriam Kavanagh

Head of Financial Regulation, Governance

& Registration

Voluntary Regulation

Office

Finance Webinar

June 30th 2020

3pm

Medium and Long-

Term Financial

impacts

of COVID-19 on AHBs

Introduction & welcome attendees01

Miriam Kavanagh - Head of Financial Regulation,

Governance and Registration. Housing Agency, Regulation

Office

Medium and Long-Term Financial impacts of COVID-19 on

AHBs

02

Neil Anderson - Director of Finance, Tuath Housing

Financial impacts of Covid-19 on Tuath Housing

03

04

05 Ray Fanning- Head of Finance, Respond

Financial impacts of Covid-19 on Respond

Cliodhna O’Leary - Head of Finance, HAIL

Financial impacts of Covid-19 on HAIL

Question & Answer Session

3:00pm Start

4:30pm Finish

POLL

552 AHBs Registered

275 AHBs VRC

197 Tier 1s

56 Tier 2s

22 Tier 3s

AHB Sector Scale & Size

Tier 1

Tier 3

Tier 2

3,375 Units

28,419 Units.

5,198

Units

POLL

*17 Tier 3 AHBs & 56 Tier 2 AHBs. Figures

are not audited, consolidation for

directional purpose only

Housing Assets

Gov. Capital Grants

CALF

Financial Context - 2018

€605M

€3.1BN

€1.36BN

€295M

€3M

€0.7BN

€0.29BN

€15M

HFA

Ti e r 3 * Ti e r 2 *

COVID – 19 Initial Impact

Housing Impacts

Suspension of non-essential

services, rent reductions &

arrears, repairs

Care & Support ServicesDevelopments

Initially development sites

closed due to restrictions,

impact to delivery.

Homeless Services

Successful short-term

solutions implemented with

AHBs & DRHE

AHBs were fast to act with

short-term solutions created in

‘emergency period’.

Immediate Impacts

Patient care, staff & patient

risk of infection.

Increase in costs for PPE and

support staff.

Context: Unit Growth Tier 3 AHBsPlanned Growth - Forecas ts

2019

3,024 4,171 3,886

2020 2021

11,081

€BN

Forecast total debt €5.22BN in 2023

€0.0

€0.5

€1.0

€1.5

€2.0

€2.5

€3.0

€3.5

€4.0

€4.5

€5.0

2018 2019 2020 2021

Projected Debt - Tier 3 AHBs

Gov Grants CALF HFA & Other Loans

Planned Growth - Un i t s

COVID Impact on Unit Growth

Survey Results

Yes, 64%

No, 36%

2020

Question: Have you assumed unit growth will be impacted due to COVID-19?

Yes, 33%

No, 67%

2021

• 64% of organisations assume unit growth will be

impacted in 2020

• 33% of organisations assume unit growth will be

impacted in 2021

• Feedback on Impact on Growth:

• Delays in delivery due to restrictions

• Up to 25% reduction vs. targets

• Delays in closing acquisitions

• Delays in allocations due to viewings restrictions

• Revised 2020 budgets

Rental & Housing Income

COVID- 19 Impacts to Housing Income

€0

€50

€100

€150

€200

€250

€300

2018 2019 2020 2021

Forecasted Income

Rental Income Other Housing Income Non Housing Income

€M

• Unemployment impacting differential rents

• No Rent Reviews

• Slow down in development/acquisition impacting

P&A

Fundraising Income

From 17 Tier 3 Forecasts

• Significant fundraising amounts forecasted for 2020

and 2021.

• COVID-19 has negatively impacted fundraising

income.

• Reduction in fundraising highlighted by AHBs as a top

risk to their organisation.

• Some AHBs expect that fundraising could drop by

25%.

“90.31% indicated that their charities’ fundraising plans for

2020 had been cancelled or postponed “ Charities Regulator

POLL

Repairs & Maintenance

• 60% of organisations reported they have

recorded a material change in

expenditure since the start of the

COVID-19 crisis.

• AHBs highlighted that they had deferred

planned maintenance works due to

COVID-19 restrictions.

• Reductions in day-to-today repairs.

• Only essential repairs were carried out.

• Need to think about backlog in the

medium term.

€16.8€19.1

€9.9€8.8

€7.1€8.2

€1.5€1.6

€0.0

€5.0

€10.0

€15.0

€20.0

€25.0

€30.0

€35.0

€40.0

2020 2021

Forecasted Repairs & Maintenance Spending

Reactive/Routine Maintenance Planned Maintenance

Cyclical Maintenance Void Maintenance

€M

STRESS TESTING & FORECASTING

Question: Have you revised the budget/forecast?

• 60% of organisations have revised their organisations stressed

scenarios for 2020 (31% for 2021).

• Changes to assumptions include:

• Rental reductions

• Reduction in Fundraising Income

• Change to planned maintenance spending

• Reduced interest payments

• Increase services and PPE extra costs

• Additional IT costs for remote working

• Only some organisations have conducted stress testing on

revised plans

Yes, 40%

No, 60%

Yes, 67%

No, 33%

2020

2021

POLL

?

Economic Outlook

World Bank Report

“A second wave of Covid-19 would wipe out any chance of economic

recovery in Ireland either for this year or next.” OECD

ESRI Report May 2020

Second Wave?

• The global economy will shrink by 5.2% in 2020

• Deepest recession since WWII

• Emerging market and developing economies (EMDEs) are expected to

shrink by 2.5% this year, their first contraction as a group in at least sixty

years.

Most Likely Scenario:

• GDP Declines by 12.4% 2020

• Consumer spending drops 13%

• Unemployment at 17% for 2020

Irish Fiscal Advisory Council Report May 2020

• Gov. deficit projected to be €13 billion in 2021 & likely to

remain large for many years

• Unemployment at 9% for 2021

“Ireland is only at the end of the

beginning of the current economic

shock caused by Covid-19 and the

future scale of its economic impact is

uncertain.”

Central Bank of Ireland

Revised Cashflow to the end of 2021

Fully revised financials for the remainder of 2020 and 2021

Stress tested 2020 and 2021 for the perfect storm

The Board has fully reviewed and understands the economic, operational and financial impacts in the stressed scenarios

Regulation Office Expectations

Mitigating Actions

THANK YOU

TREASURY• Cash management

• Visibility of cash balances in Financial Statements

• Cash min/max balance

STRESS TESTING• Part of overall risk framework

• Scenario selection should be linked to risk identification

• Scenarios should not be too conservative

• Vulnerabilities of the Business Plan

• Mitigating actions

KEY RATIOS

ASSUMPTIONS• All key underlying assumptions should be clearly identified

• Any changes from the previous year highlighted and explanation

provided

• Business Plan and Financial Forecast linked

A p p e n d i x :

A S S E S S M E N T F I N D I N G S

• Gearing & Liquidity

• Clearly defined risk appetite

around KPIs