PRESENTATION TO THE PORTFOLIO PRESENTATION TO THE PORTFOLIO COMMITTEE ON HOUSINGCOMMITTEE ON HOUSING
Wednesday, May 14, 2008Wednesday, May 14, 2008
Contents
1. Mandate
2. Strategic Objectives
3. Financial Performance
4. Business Performance
5. Business Plan 2009-2011
6. Retail
7. Strategic Partnerships
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1. Mandate
The National Department of Housing established the National Housing Finance Corporation Limited (NHFC) as a Development Finance Institution in 1996 with the principal mandate of broadening and deepening access to affordable housing finance for the low to middle income households
The Corporation achieves that mandate by :• Making housing finance accessible and affordable for the low to
middle income households
• Supporting the Breaking New Ground (BNG) Strategy by facilitating the development of sustainable human settlements
• Facilitating the development of a viable and sustainable low to middle income housing finance market
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1. Mandate (cont.)
Mission
Providing innovative and affordable housing finance solutions to the low to middle income market.
Vision
To be the leader in the development finance of the low to middle income housing market.
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2. Strategic Objectives
2.1 Effective delivery of housing finance to support the Government’s strategy in reducing the housing backlog through:
• Financing an amount of R726 million for the provision of low income housing for both rental and ownership;
• Attaining an impact of 25,025 housing opportunities (Retail included); and
• Facilitating and providing technical assistance to various tiers of government in the drive to deliver affordable housing at the required scale.
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2.Strategic objectives (cont.)
2.2 Implementing the Retail Home Loan Business by:
• Providing loans directly to target market;
• Facilitating housing delivery through provision of financial products and services;
• Developing appropriate products and educational material to address the needs of the target market; and
• Developing appropriate credit scoring system to support roll-out of new products.
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2.Strategic objectives (cont.)
2.3 Intensify delivery through strategic partnerships evidenced by:
•Entering into risk sharing agreements with Banks and other financiers active in the low to middle income housing market to leverage the Corporation’s resources to deliver homes at a greater scale;
•Entering into joint ventures with private sector players such as PACH to develop innovative products for the housing market;
•Partnering with other public sector entities in achieving impact in the housing market; and
•Sourcing and mobilising funding to support the needs of the low to middle income housing sector institutions.
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3. Financial Performance 2008 to Budget Summary Income Statement
Mar 2008 % Mar 2008Draft unaudited Change Budget
R'000 R'000
Lending Income 84,078 -34% 128,346
Less Impairments 13,364 67% 8,000
Net Lending Income 70,714 -41% 120,346
Less Operating Expenses 77,242 -23% 100,454
Operating Profit / (Loss) (6,528) -133% 19,892
Investment & Sundry Income 111,560 70% 65,532
Net Profit 105,032 23% 85,424
Tax 30,459 23% 24,773
Profit After Tax 74,573 23% 60,651
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3.Financial Performance 2007/2008 to Budget
Net Lending Income
• Lower disbursements
• Lag between approvals and disbursement
• Increased impairments
• High interest rate environment
• NCA
(41% below)
Operating Expenses
• Delay in cost mainly related to new retail business (marketing, advertising and consultancy costs)
(23% below)
Key expense items• Employee cost R45m• Outsourced services R7m• Professional fees R4m
Financial Performance
Profit after tax
(23% above)
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4. Business Performance 2008 - Housing Impact
ACTUAL: 14 121
BUDGET: 17 192
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4. Business Performance 2008 Provincial Spread
DISBURSEMENT PER PROVINCE 2007/2008
Eastern Cape 28%
Free State 2%
Gauteng 48%
KwaZulu Natal 3%
Limpopo 8%
Mpumalanga 1%
Western Cape 10%
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4. Business Performance 2008Quarterly Approvals
Quarterly Approvals - Value and Impact
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Quarters
Hous
ing U
nits
0
50
100
150
200
250
300
350
400
Valu
e in
milli
ons
Loan Approvals (Rm) 9 63 193 343
Housing Units 7,230 321 2,044 13,229
June Sept Dec Mar
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5. Business Plan 2009-2011Overview
25,0
25
31,5
62
39,0
97
2009 2010 2011
Housing Opportunities
R726m
2009
R1,1
91m
2010
Disbursements
nil
R1b
illion
R500 m
illion
2009 2010 2011
Funding Requirements
R1,2
37m
2011
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5. Business PlanImpact 2008 and Plan years 2009-2011
2008 2009 2010 2011
Projects (Units) 6,545 7,649 13,417 11,390
Commercial (Loans/Units) 7,576 11,967 8,482 10,362
Retail (Units) 5,409 9,663 17,345
TOTAL IMPACT 14,121 25,025 31,562 39,097
Disbursements (R million) 369 726 1,191 1,237
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5. Business PlanIncome & Expenditure Projections
Mar-08 % Mar-09 Mar-10 Mar-11
Forecast Change Budget Budget Budget
R'000 R'000 R'000 R'000
Operating Income 107,528 -4% 103,450 236,889 387,030
Lending Income 107,528 8% 116,015 258,258 420,604
Impairments -12,564 -21,368 -33,575
Operating expenses - Direct 74,530 31% 97,550 104,311 124,097
Employee 36,498 73% 63,089 70,729 83,623
Marketing 11,292 -30% 7,905 12,789 17,423
Outsourced Services 21,933 -10% 19,670 13,351 14,973
Professional Fees 3,107 7% 3,342 3,588 3,803
Travel & Entertainment 1,699 109% 3,543 3,854 4,275
Operating expenses - Indirect 10,608 53% 16,201 20,107 22,007
Administration 1,028 59% 1,641 1,811 1,965
Communication 1,560 48% 2,312 2,421 2,706
Computer 1,167 205% 3,561 6,627 7,403
Office Expenses 1,099 127% 2,502 2,668 2,964
Premises 4,520 6% 4,809 5,087 5,349
Training & Development 945 45% 1,370 1,486 1,613
Sundry Expenses 288 6 6 8
Total Operating Expenses 85,137 34% 113,751 124,418 146,104
Net Operating Profit / (Loss) 22,391 -146% -10,301 112,471 240,926
Other Income 98,443 -7% 91,813 32,326 24,729
Investment Interest 85,501 -6% 80,700 19,953 9,976
Sundry Income 12,941 -14% 11,113 12,373 14,752
Net Profit / (Loss) 120,834 -33% 81,513 144,797 265,655
Tax 35,042 -33% 23,639 41,991 77,040
Net Profit / (Loss) After Tax 85,792 -33% 57,874 102,806 188,615
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5. Business Plan Key Income and Expense items
Explanation of Key Income and Expense items for 2009 1. Lending Income
The 8% increase is mainly due to new business.
2. Employee Costs Employee costs are expected to increase by 73% due to 34 new positions created (23 for Retail) and an annual increase of 8.5%.
3. Outsourced Services Included in outsourced services is the cost related to the outsourcing of certain areas relating to Retail in line with the model.
4. Travel and entertainment Travel & Entertainment has increased by 109%. The increase relates mainly to the roll out of Retail business. Activity has also increased in Credit, Projects and Marketing divisions relating to existing and new projects.
5. Administration costs The increase of 60% is due to the expected increase in depreciation of new furniture for Retail.
6. Communication 48% Office expenses 128% Training and development 45%
The increase is due to the expected increase in number of employees and Retail.
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5. Business Plan - Balance Sheet
Three Year Balance Sheet
31 March 2009 31 March 2010 31 March 2011Budget Budget Budget
R R RAssets
Non Current assets 1,678,607,886 2,668,278,180 3,499,087,458 Loan debtors 1,645,441,666 2,639,315,643 3,475,883,481 Fixed assets 15,177,500 10,973,817 5,215,256 Equity Investments 15,696,624 15,696,624 15,696,624 Deferred taxation 2,292,096 2,292,096 2,292,096
Current assets 963,751,704 1,054,117,468 913,446,574 Accounts receivable 20,893,430 30,007,333 23,377,703 Taxation Receivable 5,543,928 - - Money Market Investments - NHFC 483,013,986 570,741,372 437,886,001 Funds Under Management 451,297,360 450,365,763 449,179,870 Bank balances and cash 3,003,000 3,003,000 3,003,000 Non-current assets held for sale - - Total Assets 2,642,359,590 3,722,395,649 4,412,534,032
Equity & Liability
Capital & Reserves 2,124,391,309 3,227,197,177 3,915,812,073 Ordinary Share Capital 880,000,060 880,000,060 880,000,060 Distributable reserves 986,517,035 1,044,391,249 1,147,197,117 Distributable reserves - current year 57,874,214 102,805,868 188,614,897 Grant capital 200,000,000 1,200,000,000 1,700,000,000
Non Current Liabilities 467,930,709 463,687,003 458,868,754 Long Term Liabilities - Funds Under Management 451,297,360 450,365,763 449,179,870 Deferred Income 16,633,349 13,321,240 9,688,884
Current Liabilities 50,037,572 31,511,469 37,853,205 Accounts Payable 50,037,572 31,511,469 37,853,205 Taxation Payable -
Total Liabilities 2,642,359,590 3,722,395,649 4,412,534,032
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5. Business Plan - Funding
• Capital requirements are as follows:
• The Corporation has established a funding committee to deal with the funding programme.
• Discussions are underway with multi-lateral institutions– European Investment Bank (EIB) – French Development Agency (AFD)
• The credit rating of the Corporation was confirmed by Global Credit Rating Company in November 2007 as AA- and A1+ for long and short term respectively.
YEAR TOTAL
2009 nil
2010 R 1 billion
2011 R 500 million
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6. Retail Pilot
•MOU signed with SAPO.
•Pilot offering mortgage loans commenced on 23 May 2007 through five SAPO branches in Gauteng targeting Post Office staff.
•Additional distribution channels introduced in August 2007 due to low number of applications received from SAPO.
•Building and renovation loans added to product offering in September 2007.
•Rolled out to Kwa-Zulu Natal, Western Cape and Free State in November 2007.
•SAPO staff trained and borrower education material developed.
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6. Retail Roll-out Plan
•Development of infrastructure (people, processes, technology and governance) underway.
•Envisaged to be in place for roll-out to public from end of July 2008.
•Distribution channels:
•SAPO
•Mortgage originators
•Loan officers
•Developers
•Call Centre
•Internet
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7.Strategic Partnerships
•JV with PACH to introduce the Income Linked Home Financing Instrument.
•MOU was signed with ABSA on 26 November 2007 that will result in R1.3bn released towards affordable housing.
•Mou with Basil Read - Mixed income intergrated projects based on Cosmo experience
•Agreement with DBSA consortium (DBSA, NHFC, French Development Agency and Gauteng Partnership Fund) Intergrated developments projects on certain land parcels managed by JPC; and
•Provinces – Facilitation to fast track housing delivery including pre-project funding, bridging finance and project management.
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